Oil prices fell on Monday as a rising US dollar made crude more expensive for non-US investors to buy greenback-dominated assets.  Nexen photo.

Oil prices drop for third straight day

Oil prices were caught in a wave of selling by investors on Tuesday.  Amid pressure from a rising US dollar, equities, bonds, cryptocurrencies and commodities all dropped, but despite the decline, the crude market is still in positive territory in 2018.

By 1:55 p.m. EST, Brent crude was down 61 cents to $67.01/barrel and US WTI was trading down 245 cents to $63.70/barrel.  The Canadian Crude Index fell 5 cents to $34.33.

Since Jan. 26 when the S&P 500 hit a record high, the benchmark US stock index has lost 8 per cent.  Oil has also fallen, but only by 4.9 per cent.  Cryptocurrency bitcoin is a big loser in the recent slide, dropping half of its value.

At 24,323.98, the Dow Jones is down slightly on Tuesday and since Feb. 1, the US dollar has edged up 1.1 per cent.  On Monday, financial markets sank on a sharp rise in US bond yields spurred concerns over possible increases in inflation and interest rates.

“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,” Norbert Rücker, head of macro and commodity research at Julius Baer in Switzerland told Reuters. “With hedge funds still excessively long oil futures contracts, profit-taking is set to pressure prices in the near term.”

According to Reuters, one factor insulating oil from bigger losses is the structure of the forward curve.  The prompt futures contract is trading higher than those for delivery in the future.

However, with the market’s dour mood, Anthony Headrick, energy market analyst at CHS Hedging LLC told Reuters “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”.

As well, oil demand traditionally declines at this time of year as many refineries shut down for maintenance at the end of the winter, a peak-consumption time in the northern hemisphere.

The Exxon 320,000 barrel per day (b/d) Antwerp refinery distillates unit will be closed in March for maintenance.

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