The key drivers for the market are expectations of the US sanctions on Iran as well as OPEC’s decision not to increase production further. However, there are reports today that Saudi Arabia and other oil producers have discussed possible output increase last week in Algeria, and that the countries decided to revisit the issue of possible increase in December meeting. Saudi is said to plan to boost oil supply by 200-3-00K bpd in next two month.
However, the market reaction to the reports is limited as this is not enough to compensate for lower Iran output as the total shortfall is expected to come around 1 million bpd. As long as market participants doubt that the key producers will be able to compensate for the shortfall in Iran and Venezuela, the will remain intact. Brent could shift to a corrective mode in the near term, but the potential profit-taking should be limited at this stage.