Investing.com – Crude oil prices settled sharply lower on Tuesday as investors feared a ramp up in U.S. shale output would undermine OPEC’s efforts to cut global supplies.
On the New York Mercantile Exchange crude futures for April delivery fell 1.1% to settle at $60.71 a barrel, while on London's Intercontinental Exchange, Brent lost 0.43% to trade at $64.67 a barrel.
U.S. crude production from major shale formations is expected to rise by 131,000 bpd in April from the previous month to an all-time high 6.95 million barrels per day, the U.S. Energy Information Administration (EIA) said in a monthly report on Monday.
That renewed investor fears that rising U.S. production would likely offset OPEC and Russia’s efforts to slash excess supplies which has narrowed the gap between crude supply and demand.
The downbeat session comes as crude prices retreated from session highs of $61.97 a barrel which followed president Donald Trump’s decision to replace Rex Tillerson with CIA director Mike Pompeo as Secretary of State. Pompeo reportedly shares similar views on the Iran nuclear deal to Trump.
“I wanted to either break it [the Iran nuclear deal] or do something and he felt a little bit differently, so we were not really thinking the same,” Trump told reporters following his decision to oust Tillerson.
RBC said Trump’s decision to remove Rex Tillerson will have important implications for Iran and Venezuela.
“For Iran, Pompeo has had a hawkish position on the nuclear deal. For Venezuela, it may set the stage for additional US measures to isolate Venezuelan president Nicolas Maduro's government and potentially promote a leadership change there,” RBC said.
Also adding to negative sentiment on oil prices was a lower incentive to sell rather than store crude as current prices shifted from trading at a premium to forward prices to a discount – a shift from backwardation to contango - raising the prospect of a build of crude supplies.