By Collin Eaton
HOUSTON (Reuters) - Oil prices dipped on Thursday but pared losses as investors turned their attention to the impending loss of Iran's crude exports after the United States re-imposes sanctions in early November.
In early trading, global benchmark Brent crude fell below $79 per barrel, or as much as 1.7 percent the day after a U.S. Energy Department report showed oil producers have put 22 million barrels in storage tanks over the past four weeks of increases in U.S. crude stocks.
"We need to see signs loss of Iranian barrels will be replaced by other producers," said Gene McGillian, vice president of market research for Tradition Energy in Stamford, Connecticut. "We could see 2 million barrels taken off the market."
Brent crude was down 31 cents at $79.74 a barrel at 1:24 p.m. EDT (1724 GMT). It has dropped almost $7 since Oct. 3 when it reached $86.74, the highest since late 2014. U.S. crude was down 64 cents at $69.11.
Saudi Arabia said this month it would ramp up production by 300,000 barrels per day to help offset a sharp reduction of Iran's crude exports next month. Investors remained skeptical any country has enough spare capacity to make up for loss of crude from Iran, one of the Organization of the Petroleum Exporting Countries' largest producers, analysts said.
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"We're seeing some buying come back in," said Phil Flynn, an oil market analyst at Price Futures Group in Chicago.
U.S. crude inventories rose 6.5 million barrels last week, the Energy Information Administration said on Wednesday, the fourth straight weekly increase and almost three times what analysts had forecast. [EIA/S]
Macroeconomic worries still weighed on prices. This month, the International Monetary Fund downgraded its forecast for 2018 global economic growth, which has weighed on oil prices. But tension between Saudi Arabia and the United States after the disappearance of Saudi journalist Jamal Khashoggi has supported prices.
U.S. lawmakers pointed at the Saudi leadership over the disappearance and suggested sanctions could be possible. Saudi Arabia has denied that it had any role in Khashoggi's disappearance.
President Donald Trump on Wednesday gave Saudi Arabia the benefit of the doubt in the journalist's disappearance, suggesting the White House may not take additional action against Saudi Arabia.
"Although there's tension between Saudi Arabia and the U.S., the market doesn't think the Saudis are going to use their oil as a weapon," said Andy Lipow, an oil market analyst at Lipow Oil Associates in Houston. "They'd face additional public negative public relations."
(Additional reporting by Alex Lawler and Osamu Tsukimori; Editing by David Gregorio)