Investing.com -- Crude futures fell sharply on Tuesday, amid a stronger dollar and record output by Saudi Arabia as the race between the U.S. and OPEC for global market share of crude continues to escalate.
On the New York Mercantile Exchange, WTI crude for July delivery plunged 2.22 or 3.68% to $58.02 a barrel, experiencing its largest one-day decline since April 8 when it nose-dived more than 6% on the session. At one point on Tuesday, Texas Light Sweet futures fell to $57.95 its lowest level on the month.
On the Intercontinental Exchange (ICE), brent crude for July delivery also tumbled falling 2.14 or 3.23% to 64.13. Earlier in the session, brent futures dipped to a session-low of 63.97, its lowest level since April 28. Brent has fallen significantly since peaking above $70 a barrel on May 6 when it reached a five-month high.
The spread between the U.S. and international benchmarks of crude rose slightly to 6.11, slightly above Monday's level of $6.07.
Saudi Arabian oil minister Ali al-Naimi said the kingdom pumped 10.3 million barrels per day in March, slightly above its previous record high of 10.2 million bpd in August, 2013. Saudi Arabia, the world's largest exporter, also exported nearly 8 million bpd on the month, its highest level in nearly 10 years.
Despite a glut of oversupply in the global crude market, Al-Naimi has resisted calls over the last six months to slash production. In April, OPEC increased output by 160,000 bpd for the month from an upward revised 960,000 bpd gain in March. OPEC's supply level for April exceeded 31.2 million bpd, its highest level since September, 2012.
Last November, OPEC sent crude prices crashing when it decided to keep daily production levels constant triggering a protracted battle with the U.S for market share.
Energy investors await Tuesday's report by the American Petroleum Institute for further signals on U.S. supply levels. Analyst expect the data to show that stockpiles fell by 2.1 million barrels for the week ending May 15. Last week, the Energy Information Administration said crude inventories nationwide dropped by 2.2 million barrels for the week ending May 8, declining for the second consecutive week.
Previously, U.S. stockpiles peaked above 480 million barrels – the highest level in at least 80 years.
The draw has eased fears that the U.S. could reach full storage capacity in the near future, a doomsday scenario that could cause crude prices to plunge even further. WTI futures have declined by more than 40% since reaching triple digits last spring.
Meanwhile, the dollar surged on Tuesday as U.S. housing starts in April jumped more than 20% -- registering one of its strongest months on record. The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 1.1% in U.S. morning trading to an intra-day high of 95.55, its highest level in more than two weeks.
It coincided with a sell-off in the euro after a member of the European Central Bank said on Monday night that the ECB will increase purchases of European Asset-Backed Securities in May and June to offset a seasonal lack of liquidity. EUR/USD dipped more than 1.5% to an intraday low of 1.112, its lowest level since May 5.
Crude prices have a tendency to move lower when the euro depreciates against the dollar.