Crude futures fall sharply, as geopolitical risks in Middle East weigh

Investing.com -- Crude futures fell sharply on Thursday, as energy investors continued to digest a wave of supply data from earlier in the week and geopolitical risks in the Middle East weighed.

On the New York Mercantile Exchange, WTI crude for June delivery fell 0.64 or 1.06% to 59.86 a barrel, closing below $60 for the first time in three sessions. Texas Light Sweet futures have been relatively flat this month after gaining more than 20% in April, amid reduced concerns of oversupply in the U.S.

A day earlier, the International Energy Agency said in a monthly report that global oil supply stood at 95.7 million barrels per day, as a slowdown in U.S. shale production failed to offset increased output among OPEC nations and several unexpected non-OPEC members. The supply level remained unchanged from the previous month.

On the Intercontinental Exchange (ICE), brent crude for July delivery neared $68 a barrel before falling to 66.66 at Thursday's close, down 0.61 or 0.91%. The spread between the international and U.S. domestic benchmarks of crude stood at $6.80, just above Wednesday's level of 6.77.

As U.S. president Barack Obama discussed the framework of a comprehensive Iranian nuclear deal with a host of Persian Gulf leaders at a summit at Camp David, house leaders continued their debate on the merits of an agreement on Capitol Hill. After a vote on the Iran Nuclear Agreement Review Act of 2015 received near unanimous support, the legislation will go to the White House for President Obama's signature.

"It is fair to say that there are deep, bipartisan concerns about where these negotiations are heading," Rep. Ed Royce (R – California), Chairman of the House Foreign Affairs Committee, said in a statement. "I fear that the agreement that is coming will be too short, sanctions relief will be too rapid, inspectors will be too restricted, and Iran’s missile program will be plain ignored."

Last month, Reuters reported that Iran has 30 million barrels of oil stored in offshore tankers ready for export, after the Persian Gulf nation agreed on the framework of a nuclear deal with Western powers. In addition, Facts Global Energy, an energy consulting firm, has forecast that Iranian oil exports could reach a level of 1.7 million barrels per day within 12 months of a final deal, up from its current level of a million bpd.

If economic sanctions are lifted against Iran, an outflow of Iranian oil could depress energy prices in a global market already saturated by a glut of crude supply.

Elsewhere, Iranian ships reportedly sent warning shots near a Singapore-flagged ship on Thursday in international waters, causing it to retreat into United Arab Emirates waters, according to U.S. officials. Earlier this month, Iran captured a Marshall Islands-flagged merchant ship in the Strait of Hormuz following a financial dispute.

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In Yemen, millions of citizens received shipments of food and medicine in the midst of a five-day ceasefire between Iranian-backed, Shiite-led Houthi rebels and Saudi Arabia. Yemen has been bombarded by Saudi-led airstrikes since late-March when a Houthi advance forced president Abd-Rabbu Mansour Hadi to flea the country.

Energy traders are sensitive to any geopolitical news involving Saudi Arabia, the world's top exporter of crude.

The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, continued on a downward path, falling to a three-month low at 93.18, before slightly rebounding in U.S. afternoon trading.

The index reached as high as 100.27 in mid-April. EUR/USD, meanwhile, moved above 1.14 for the first-time since late-January, as the spread between U.S. 10-year and Germany 10-year continued to narrow.

Dollar-denominated commodities such as crude become less expensive for foreign purchasers when the dollar weakens.