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By Barani Krishnan
Investing.com - Saudi Arabia says it’s racing toward full crude production after last week’s attack on its largest oil facility, but traders aren’t fully buying the story.
That, and simmering tensions in the Middle East, bumped crude prices at Monday’s close after an early slide also triggered by weak European economic data.
U.S. West Texas Intermediate crude settled up 55 cents, or nearly 1%, at $58.64 per barrel. It earlier fell to as low as $57.41.
U.K. Brent oil settled up 95 cents, or 1.4%, at $65.23.
Top oil exporter Saudi Arabia said it expected to restore as soon as next week production lost from the Sept. 14 attack on its Abqaiq crude processing facility that turned out 5.7 million barrels per day. Saudi Arabia has already restored around 75% of output from the plant, Reuters reported, quoting Saudi officials.
But the market wasn’t entirely convinced by the Saudi claims, traders said.
“I lean towards the concept that the actual capacity will take months to return,” said Scott Shelton, energy futures broker at ICAP (LON:NXGN) in Durham, N.C.
Oil prices also recovered on the notion that this week’s U.N. General Assembly might not produce any outcome that will defuse tensions in the Middle East.
“The U.N. general assembly is under way, and that will print many geopolitical headlines,” said Olivier Jakob, head of oil risk consultancy Petromax.
“If Trump and Rouhani are not able to make some progress then we can expect Iran to continue its policy of maximum resistance and this will translate in more attacks,” he added, referring to efforts by the U.S. president to reach out to his Iranian counterpart for talks.
In a surprising development on Monday, Rouhani said that he will unveil a peace plan for the Middle East at the U.N. assembly.
"This year we will present a plan to the world at the United Nations that the Islamic Republic of Iran in cooperation with the countries of the region can create security for the Persian Gulf and the Oman Sea with the help of the countries of the region," he said on his website, without providing further details.
In an apparent gesture of goodwill, Iran also reportedly released a British-flagged tanker, the “Stena Impero”, that it seized in July.
But at the same time, Iranian Foreign Minister Javad Zarif reiterated his caution that Iran will resort to an “all-out war” if it is targeted by the United States or Saudi Arabia over the Saudi attack. Yemen-based Houthi rebels have claimed responsibility for the attack, but the U.S. has accused Iran, which has denied the charge.