By Neanda Salvaterra 

Oil prices inched lower Tuesday as investors anticipate that Iranian crude lost to U.S. sanctions will be replaced by supply from other major producers.

Brent crude, the global oil benchmark, fell 0.78% to $80.16 a barrel on London's ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate futures were down 0.85% at $71.17 a barrel.

Iran's crude exports have declined at a faster-than-expected pace ahead of the U.S. sanctions next month and that helped push Brent above $80 a barrel. But these lost barrels are already being offset by increased supply from major producers such as Saudi Arabia and Russia, analysts say.

"Iranian export will fall quite sharply from November onwards so there is a bit of timing mismatch as the Saudi's and others have already offset that Iranian falloff," said Amrita Sen, analyst at consultancy Energy Aspects.

The resumption of U.S. sanctions on Tehran is expected to send Iranian oil supply tumbling by around 1.3 million barrels a day to about 1 million barrels a day, analysts say.

Still, oil prices are being kept in check by additional global supply, as other members of the Organization of the Petroleum Exporting Countries and partners such as Russia have been ramping up production to fill the gap, said the International Energy Agency last Friday.

OPEC crude output rose by 100,000 barrels a day in September, to 32.78 million barrels a day, with the biggest increase coming from Saudi Arabia. Additional supply is also coming from elsewhere, including the U.S.

Still, politics in the Middle East continues to disturb the balance of oil supply. Washington has threatened to sanction Riyadh over the suspected killing of a dissident Saudi journalist and the Saudi's have said they could retaliate by hiking the price of crude to well above $100 a barrel.

Most analysts view Saudi statements as bluster.

"I don't think this is going to be the case," said Olivier Jakob, head of consultancy Petromatrix. "Using oil as a weapon is the last bullet for any country so I don't think they will do that because it would totally destroy their standing as a reliable source of energy."

Later Tuesday, numbers from the industry group American Petroleum Institute are expected to show a rise in U.S. crude stocks. Meanwhile, official data due Wednesday may reveal a decline in U.S. exports due to Hurricane Michael that caused a temporary shutdown of oil infrastructure along the Gulf of Mexico this month.

Investors will also be watching for statistics on economic growth due later in the week from China, one of the world's largest oil importers.

Nymex reformulated gasoline blendstock--the benchmark gasoline contract--was down 0.26% to $1.94 a gallon. ICE gasoil changed hands at $711.50 a metric ton, down $4.50 from the previous settlement.

Write to Neanda Salvaterra at neanda.salvaterra@wsj.com

(END) Dow Jones Newswires

October 16, 2018 06:54 ET (10:54 GMT)