Oil futures rose more than one per cent on signs that OPEC would not be prepared to raise output to address shrinking supplies from Iran, and as Saudi Arabia signaled an informal target near current levels.
Brent crude futures rose 98 cents, or 1.3 per cent, on Tuesday to settle at $US79.03 a barrel.
US West Texas Intermediate crude gained 94 cents to settle at $US69.85 a barrel, a 1.4 per cent increase.
Prices pared gains in post-settlement trade after data from industry group the American Petroleum Institute showed US crude inventories rose by 1.2 million barrels in the week to September 14 to 397.1 million, compared with analysts’ expectations for a decrease of 2.7 million barrels.
Official US government data is due to be released on Wednesday.
Ministers from the Organisation of the Petroleum Exporting Countries and non-OPEC producers meet on Sunday to discuss compliance with output policies.
OPEC sources have told Reuters no immediate action was planned and producers would discuss how to share a previously agreed output increase.
Bloomberg reported on Tuesday, citing unnamed Saudi sources, that the kingdom was currently comfortable with prices above $US80 per barrel, at least for the short term.
Bloomberg reported that while Saudi Arabia had no desire to push prices higher than $US80, it may no longer be possible to avoid it. US sanctions affecting Iran’s petroleum sector are due to come into force from November 4.
Reuters previously reported that Saudi Arabia wants oil to stay between $US70 and $US80 a barrel for now, as the world’s biggest crude exporter strikes a balance between maximising revenue and keeping a lid on prices until US congressional elections.
Russian Energy Minister Alexander Novak said an oil price between $US70 and $US80 was temporary and sanctions-driven, adding the long-term price would stand around $US50 a barrel.
US Energy Secretary Rick Perry said last week in Moscow that he did not foresee any price spikes once sanctions came into effect, and was positive about Saudi output.
Oil futures also drew support from geopolitical risk on Tuesday.
Russia’s Defence Ministry said a Russian military plane was shot down by Syrian anti-aircraft systems, but accused Israel of indirectly causing the incident, saying Israeli jets nearby had put the Russian plane in the path of danger.
The longer-term outlook remains weighed down, however, by an escalation in the China-US trade war that has clouded the outlook for crude demand.
China, one of the world’s largest oil consumers, on Tuesday added $60 billion of US products to its import tariff list.
The move was in retaliation for President Donald Trump’s planned levies on $200 billion worth of Chinese goods.
The tariffs are likely to limit economic activity in both China and the United States.