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Oil settles slightly higher as US, Saudi tensions eased

Oil settles slightly higher as US, Saudi tensions eased

Mubasher: Oil prices rose to settle slightly higher on Monday, as tensions between the US and Saudi Arabia over the disappearance of a prominent journalist seemed to ease.

In addition, worries regarding fuel demand growth outlook capped earlier gains.

US Nymex futures rose 0.6% to settle at $71.78 per barrel (pb) after tapping as much as $72.70 pb, while Brent crude futures rose 0.4% to $80.78 pb.

US President Donald Trump threatened “severe punishment” should an investigation find Saudi Arabia involved in the disappearance of Saudi journalist Jamal Kashoggi, who was last seen entering the Saudi consulate in Istanbul, Turkey two weeks ago.

In response, Saudi Arabia vowed retaliation against any moves from the US, noting that the oil-rich nation “plays an effective and active role in the global economy.”  

In the same vein, a Saudi-owned Al Arabiya’s general manager Turki Aldakhil warned on Sunday that any sanctions against Riyadh would lead oil prices to $100, $200 per barrel or even more.

However, President Trump said he has spoken with Saudi Arabia’s King Salman, who denied any involvement in Khashoggi’s disappearance.

Trump also said that it was possible that “rogue killers” were behind the journalist’s disappearance.

Trump may have been looking for a way to blame the incident on any perpetrator other than Riyadh, Banyan Hill Publishing senior research analyst  Matt Badiali told MarketWatch.

“If Congress moves to sanction Saudi Arabia, it will cause oil prices to jump higher,” Badiali said.

“This comes at a particularly delicate time for oil supply” with US sanctions against Iran coming in effect next month and Venezuela’s steadily fading oil supplies, Badiali noted, adding that “any disruption to the Saudi supply or even perception of trouble will cause the price to go up.”

Nevertheless, gains for oil were curbed by concerns over lower global demand.

Last week, the Organization of the Petroleum Exporting Countries (OPEC) downgraded its forecasts for global demand growth for this year and the next.

In addition, the International Energy Agency’s (IEA) monthly report highlighted lower global oil demand, on the back of the impact of the US-Sino trade dispute.