Phil Flynn is writer of The Energy Report, a daily market commentary discussing oil, the Middle East, American government, economics, and their effects on the world's energies markets, as well as other commodity markets. Contact Mr. Flynn at (888) 264-5665
Oil fell for a third day on Tuesday as the U.S. dollar rose to its highest in more than a week in the wake of a sharp sell-off early this week on Wall Street and other stock markets.
The crude market remains in positive territory for the year however, even after Wall Street stocks on Monday posted their largest one-day fall since late 2011.
Brent crude futures <LCOc1> for April delivery settled down 76 cents, or 1.12 percent at $66.86 a barrel, after touching a session low of $66.53, the weakest since Jan. 2.
U.S. West Texas Intermediate futures <CLc1> for March delivery dipped 76 cents, or 1.18 percent, to settle at $63.39 a barrel, the lowest since Jan. 22.
U.S. crude futures were stronger in post-settlement trading after weekly inventory figures from industry group the American Petroleum Institute showed a 1.1 million barrel decrease in overall crude oil stocks for last week.
A preliminary poll by Reuters on Tuesday showed analysts expected weekly data to show U.S. crude inventories last week rose 3.2 million barrels.
“For oil, API’s numbers are supportive. The market is going to try to determine if the crude draw offsets the distillate build heading into tomorrow’s EIA report,” said Phil Flynn, analyst at Price Futures Group.
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 up more than 1 percent since Feb. 1. [.DXY]
The benchmark U.S. stock index, the S&P 500 <.SPX>, has lost 6.2 percent since it hit a record high on Jan. 26. Oil has shed 5.2 percent.
U.S. stocks eventually rebounded in volatile afternoon trading on Tuesday. Major indexes rose more than 1 percent in a drastic swing after starting the session 2 percent lower from Monday. The difference between the high and low for the Dow on Tuesday was more than 1,100 points.
“With so much volatility in the equity markets people don’t trust that rebound. Any time you get a 1,500-point move in one day that’s going to spook markets,” said Phillip Streible, senior market strategist at RJO Futures.
One factor that has lent support to oil prices is the structure of the forward curve. The prompt futures contract is trading well above those for delivery further in the future.
Oil prices have also been supported by a 1.8 million barrels per day (bpd) cut in supply by the Organization of the Petroleum Exporting Countries and Russia.
Still, rising U.S. supply has pressured oil. The U.S. Energy Information Administration said on Tuesday it expects domestic crude oil production in 2018 to rise by 1.26 million barrels per day (bpd) to an average of 10.59 million bpd. Last month, it forecast a 970,000 bpd year-over-year increase to 10.27 million bpd. REUTERS
https://www.todayonline.com/world/oil-prices-sink-1-percent-amid-global-market-plunge-us-output-spreeQuestions? Ask Phil Flynn today at 312-264-4364 A Subsidiary of Price Holdings, Inc. – a Diversified Financial Services Firm. Member NIBA, NFA Past results are not necessarily indicative of future results. Investing in futures can involve substantial risk of loss & is not suitable for everyone. Trading foreign exchange also involves a high degree of risk. The leverage created by trading on margin can work against you as well as for you, and losses can exceed your entire investment. Before opening an account and trading, you should seek advice from your advisors as appropriate to ensure that you understand the risks and can withstand the losses. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or futures. The Price Futures Group, its officers, directors, employees, and brokers may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction. Reproduction and/or distribution of any portion of this report are strictly prohibited without the written permission of the author. Trading in futures contracts, options on futures contracts, and forward contracts is not suitable for all investors and involves substantial risks. ©2018