Following a meeting here on Monday with Prime Minister Narendra Modi and chief executives of major global and Indian oil and gas companies, Saudi Petroleum Minister Khalid Al Falih said that Saudi Arabia expects its oil production to rise next month from 10.7 million barrels per day so as to counteract the shortfall resulting from the United States sanctions against Iran.
"Numbers from the American Petroleum Institute surprised the market yesterday, with USA crude oil inventories declining by 2.13 million barrels over the last week, compared to expectations of a stock build", said ING commodities strategist Warren Patterson.
Investors worry Saudi Arabia could use oil supply to retaliate against critics.
In WTI, wagers on falling prices have increased as US inventories piled up, and concerns about constrained Permian takeaway capacity and the build-up of stocks have prevailed over the past few weeks.
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Earlier in the day, Reuters reported that Mohammed Barkindo, Secretary General of the Organization of the Petroleum Exporting Countries (OPEC), said that India was projected to see the largest additional oil demand (3.7 percent per annum) and the fastest growth in the period to 2040.
Meanwhile, new figures are out for USA oil inventories.
Saudi Arabia, of course, is a major oil producer. "Saudi Aramco's desire is also to invest in consumer-facing segments such as retail fuels and petrochemicals, building an integrated downstream business spanning India as well as our commitment to invest in crude oil storage here in India in order to be more responsive and closer to the demand needs".
But for this spare capacity that Saudi Arabia has used to deliver extra barrels in the market, oil prices would "easily be at the three-digit range", he said.
The oil market, however, is now prone to paying more attention to geopolitics than to fundamentals. Last week, Pradhan said two state-owned oil refiners have booked import of 1.25 million tonne (MT) of crude oil from Iran in November.
The U.S. sanctions against Iran is the cause of turmoil in oil prices in the global market, Tasnim news agency quoted Iranian Petroleum Minister Bijan Namdar Zanganeh as saying on Tuesday.