Oil fell for a third day on Tuesday as the US dollar rose to its highest in more than a week in the wake of a sharp sell-off on Wall Street and other stock markets, a global rout that wiped out $4 trillion in value. The crude market remained in positive territory so far this year, even after Wall Street stocks on Monday posted their largest one-day fall since late 2011.
Brent crude futures were down 60 cents at $67.02 a barrel at 1:38 pm EST (1838 GMT). US crude futures were 42 cents lower at $63.73. Gasoline margins were at the lowest since mid-December, down more than 8 percent and headed for the biggest daily percentage decline since January 2.
The benchmark US stock index, the S&P 500 has lost 8 percent since it hit a record high on January 26. Oil has shed 4.9 percent. US stocks rebounded in volatile midday trading after starting the session 2 percent lower.
"It's been tough to get a read on crude with everything going on in the equities market today," said John Macaluso, analyst at Tyche Capital Advisors in New York. Oil's inverse relationship to the dollar, whereby a stronger currency makes it more expensive for non-US investors to buy dollar-denominated assets, has reasserted itself this week, with the greenback up 1 percent since February 1.
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. "With the equities sell-off Friday and Monday crude has proved to be relatively resilient in the face of these headwinds," said John Saucer, vice president of research and analytics at Mobius Risk Group in Houston.
Oil prices have 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 US supply has pressured oil prices. The US 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 10.59 million bpd this year. Last month, it expected a 970,000 bpd year-over-year increase to 10.27 million bpd.
A preliminary poll by Reuters showed analysts expected weekly data to show that US crude inventories last week rose for a second straight week. Industry group the American Petroleum Institute will issue its data on stocks on at 4:30 pm EST, followed by official figures from the US Energy Department on Wednesday morning.