Crude Oil Prices Settle Nearly 2% Lower as Traders Fret US Output Expansion

Investing.com – WTI crude oil prices settled sharply lower as signs of rising US oil production renewed focus on the rapid pace of US output ahead of supply data expected to show U.S. crude stockpiles rose for a second-straight week.

On the New York Mercantile Exchange for June delivery fell 1.93% to settle at $67.25 a barrel, while on London’s Intercontinental Exchange, fell 1.90% to trade at $73.27 a barrel.

The Energy Information Administration on Wednesday is expected to report crude supplies rose by 0.739 million barrels last week.

Expectations for a second-straight weekly build in crude supplies did little to ease fears of ongoing US oil output after the EIA reported Monday U.S. oil production rose to a record 10.264 million barrels a day in February.

The weakness in crude prices comes despite the growing prospect of new U.S. sanctions against Iran.

Israeli Prime Minister Benjamin Netanyahu presented data on Monday, claiming it was evidence of a secret Iranian nuclear weapon. The data, however, did not contained new information that was unknown to diplomats who had negotiated the landmark Iran nuclear deal in 2015.

U.S. President Donald Trump must decide on May 12 whether to restore U.S. sanctions on Iran.

If Trump does scrap the deal, it could lead to the re-imposition of secondary sanctions on Iran, pressuring countries to cut their purchases of Iranian crude, denting global supplies, pushing oil prices higher.

Goldman Sachs, said, however, that geopolitical risks have had an “only modest role” in the oil price rally, citing “strong” fundamentals and ongoing OPEC cuts as far more important catalysts to curb excess supplies and extend the rally in oil prices.

“The oil market deficit is driven by the combination of strong demand growth and remarkably strong OPEC compliance to the cuts, two dynamics that we expect will continue in coming quarters,”Goldman Sachs said in a note to clients.

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