Global oil prices extended declines Wednesday even as President Donald Trump said he would "substantially" increase U.S. sanctions on Iran.
Trump announced on his official Twitter feed that he had "instructed the Secretary of the Treasury" to increase the sanctions, after suggesting he could do so following last weekend's attacks on two Saudi Arabian oil facilities that intelligence officials have linked to Tehran.
"So nice that our Country is now Energy Independent. The USA is in better shape than ever before," Trump wrote. "Strongest Military by far, biggest Economy (no longer even close), number one in Energy!"
Brent crude contracts for November delivery were marked 67 cents lower, or 1.04%, at $63.88 per barrel following the President's Tweet. WTI contracts for October, which are more tightly linked with U.S. gasoline prices, were seen $1.04 lower. or 1.75%, at $58.30 per barrel.
With investors focused on the return to full capacity following Saturday's attacks, which Saudi Arabia's Energy Minister, Prince Abdulaziz bin Salman, said could happen by the end of this month, market attention is now turning towards the ongoing boom in U.S. shale production, which the Energy Department expects to reach 8.8 million barrels per day next month.
Around half of that total -- a record high 4.485 million barrels -- is expected to come from the shale-rich Permian Basin that laps between Texas and New Mexico, with increases also forecast for the Bakken region shared by North Dakota and Montana and the Eagle Ford field in north Texas.
"Saudi Arabia said that it will use existing inventories to fill the supply gap; however, inventories have already been depleted this year due to output cuts and the supply gap could be overwhelming if the current output disruptions are prolonged," said ING's Warren Patterson.
OPEC production cuts, which have taking more than 1.2 million barrels per day from the market since late 2017, and are expected to continue into the first quarter of next year, have not only depleted Saudi Arabia's overall stockpiles but also reduced the so-called supply cushion in global crude markets, making them increasingly vulnerable to disruption-lead price surges.
U.S. sanctions on the sale of crude from Iran, whose exports have fallen more by more than 2 million barrels per day since April, as well as similar restrictions on exports from Venezuela, have kept global markets tight for much of the first half of the year.