The "correlation between oil prices and broader market trading is a driving factor and the volatility in both is enough of a reason to take some money off the table", said Tamar Essner, director of energy and utilities at Nasdaq Corporate Solutions. But the scandal does reveal one thing. Washington is largely depending on Saudi Arabia to fill the gap left by the loss of the Iranian barrels.
Saudi Energy Minister Khalid Al-Falih said OPEC and its allies are in "produce as much as you can mode".
The 1973 oil crisis began when Arab producers led by Saudi Arabia slapped an oil embargo on Western supporters of Israel in its war with Egypt, targeting Canada, Japan, the Netherlands, Britain and the United States. "Hopefully more countries will join", he said. "But Saudi Arabia is a very responsible country, for decades we used our oil policy as a responsible economic tool and isolated it from politics", Falih said. Shipping brokerage Eastport said crude prices were "expected to decline in coming months, as rising production in the USA offsets increasing global demand".
Oil prices fell more than 4 percent on Tuesday as investors sold off stocks amid concerns about slowing global economic growth.
The United States has recently hinted that it was at least considering waivers, but U.S. Treasury Secretary Steven Mnuchin said over the weekend that it would be more hard for Iranian oil customers to get waivers from the sanctions than it was during the Obama administration, and the U.S. would issue waivers, if any, only to buyers that have significantly reduced Iranian purchases.
Looking at the current short-term timetable, the US sanctions against Iran are set to start on November 4.
"We have sanctions on Iran, and nobody has a clue what Iranians export will be".
Other non-OPEC producers have also produced only 66,000 barrels per day of additional oil between May and September, the Iranian minister said, citing OPEC's estimates. "Then we'll have a clearer picture of what to expect for the first quarter of next year", Varga said. He added that Riyadh had capacity to increase output to 12 million bpd and its Gulf OPEC ally, the United Arab Emirates, could add another 0.2 million bpd.
There has been concern that just as markets tighten with the start of the US sanctions against Iran, Saudi Arabia could cut crude supply in retaliation for potential sanctions against it over the Khashoggi killing.