Oil futures rose more than 1 percent on Tuesday 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 were up $1.01 a barrel, or 1.3 percent, to $79.06 by 2:29 p.m. ET, after rising as high as $79.73 earlier in the session.
U.S. West Texas Intermediate (WTI) crude was up 94 cents, or 1.4 percent, at $69.85 per barrel, off a session high of $70.42.
Ministers from OPEC 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, the kingdom was currently comfortable with prices above $80 per barrel, at least for the short-term.
The news agency reported that while Saudi Arabia had no desire to push prices higher than $80, it may no longer be possible to avoid it. U.S. sanctions affecting Iran's petroleum sector are due to come into force from Nov. 4.
Reuters previously reported that Saudi Arabia wants oil to stay between $70 and $80 a barrel for now, as the world's biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections.
Russian Energy Minister Alexander Novak said an oil price between $70 and $80 was temporary and sanctions-driven, adding that the long-term price would stand around $50 a barrel.
U.S. 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.
"It will be no easy feat for Saudi Arabia and Russia to balance declining production from Iran and Venezuela," said Abhishek Kumar, senior energy analyst at Interfax Energy in London.
Oil futures also drew support from geopolitical risk on Tuesday.
Russia's Defense 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.
Russia has told Israel it will take all necessary measures to protect its military personnel in Syria, the foreign ministry in Moscow said.
Market participants awaited industry data on Tuesday from the American Petroleum Institute that was expected to show U.S. crude inventories last week fell for a fifth straight week. The data is due to be released at 4:30 p.m. EDT (2030 GMT) while the government's weekly report is due on Wednesday.
TRADE WAR CAPS GAINS
However, the longer-term outlook remains weighed down by an escalation in the China-U.S. 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 U.S. 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.
On Monday, the U.S. administration said it will begin to levy new tariffs of 10 percent on about $200 billion of Chinese products on Sept. 24, with the tariffs to go up to 25 percent by the end of 2018.
The tariffs are likely to limit economic activity in both China and the United States, potentially hitting growth in demand for oil as less fuel is consumed to move goods for trade.