February 6, 2018 / 3:57 AM / 4 months ago

UPDATE 9-Oil dips amid rout in stocks, bonds; dollar gains

* Wall St slumps, volatility near three-year high

* Oil up nearly 1 percent in 2018

* Seasonal drop in demand stemming from refinery maintenance

* Coming Up: API U.S. oil stock data at 4:30 p.m. EST (2130 GMT) (New throughout, updates prices, market activity and analyst comments; changes byline, dateline from LONDON)

By Bryan Sims

HOUSTON, Feb 6 (Reuters) - Oil fell for a third day on Tuesday as a wave of selling hit equities, bonds, cryptocurrencies and commodities, and amid pressure from a rising dollar, although the crude market is still in positive territory so far this year.

Even with Wall Street stocks posting their largest one-day fall since late 2011 on Monday and measures of volatility spiking to multi-year highs, reflecting heightened investor nervousness, oil has not suffered to the same extent.

Brent crude futures were down 55 cents at $67.07 a barrel at 12:02 p.m. EST (1703 GMT), while U.S. crude futures were trading 37 cents lower at $63.78.

Since the benchmark U.S. stock index, the S&P 500, hit a record high on Jan. 26, the index has lost 8 percent. Oil has shed 4.9 percent, while cryptocurrency bitcoin has lost half its value.

Major equity indexes swung from negative to positive and back after starting the session down 2 percent on Tuesday.

Oil’s inverse relationship to the dollar, whereby a stronger currency makes it more expensive for non-U.S. investors to buy dollar-denominated assets, has reasserted itself this week, with the greenback edging up 1.1 percent since Feb. 1.

“Sentiment cycles are usually short-lived and we believe that the past days’ price action marks the turning point from the peak of the current cycle,” said Norbert Rücker, head of macro and commodity research at Julius Baer in Switzerland. “With hedge funds still excessively long oil futures contracts, profit-taking is set to pressure prices in the near term.”

One factor that has helped insulate oil to some extent against a bigger rout is the structure of the forward curve, where the prompt futures contract is trading well above those for delivery further in the future.

“We saw a lot of length being built up over the last several months and are now seeing a touch of profit-taking amidst some global uncertainty,” said Anthony Headrick, energy market analyst at CHS Hedging LLC in St. Paul, Minnesota.

Financial markets sank on Monday after a sharp rise in U.S. bond yields raised concern over a possible increase in inflation and potentially higher interest rates.

Oil has been caught between the opposing forces of a 1.8 million barrels per day (bpd) cut in supply by the Organization of the Petroleum Exporting Countries and Russia, and a surge in U.S. crude output above 10 million bpd.

There is also a seasonal downturn in demand, as many refineries shut for maintenance at the end of the peak-consumption winter season in the northern hemisphere.

Exxon will close the distillates unit at its 320,000-bpd Antwerp refinery in March for maintenance, traders said.

“Demand for oil will certainly be dialed back. Inventories are still somewhat elevated, but we continue to see declines in Cushing (Oklahoma) that has been supportive,” said John Kilduff, partner at Again Capital LLC in New York.

Additional reporting by Amanda Cooper in London and Henning Gloystein in Singapore; Editing by Bernadette Baum

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