Oil eases, but avoids stocks-style volatility
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[February 06, 2018]
By Amanda Cooper
LONDON (Reuters) - Oil fell for a third day
on Tuesday, as a rout in global equities triggered losses across bonds,
cryptocurrencies and commodities, although the crude price is 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 <.VIX>, reflecting heightened investor nervousness, oil has not
suffered to the same extent.
Brent crude futures <LCOc1> were down 66 cents on the day at $66.96 a
barrel by 1155 GMT, but are still up 1 percent so far in 2018. U.S. West
Texas Intermediate crude futures <CLc1> fell by 55 cents to $63.60.
Since the S&P 500 <.SPX> hit a record high on Jan. 26, the index has
lost 8 percent. Oil has shed 4.5 percent, while cryptocurrency bitcoin <BTC=BTSP>
has lost half its value.

A factor that could 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 <0#LCO:>.
"We know that speculative positions both in terms of contracts and in
allocated dollars are at an all-time high. Thus a real pain-trade has
not yet hit the oil market," SEB head of commodity strategy Bjarne
Schieldrop said.
"Longs have not yet started to flock to the exit door. If that happens,
it will make the buying opportunity even better for the oil consumers
who buy oil on the forward curve."
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Crude oil is dispensed
into a bottle in this illustration photo June 1, 2017.
REUTERS/Thomas White/Illustration/File Photo

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, its highest since
the 1970s.
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.
"It is, however, worth remembering that global oil demand is set to grow at a
healthy rate this year, that OPEC and its 10 non-OPEC peers are impressively
disciplined at keeping their quotas and that geopolitics also helps to balance
the supply/demand equation," PVM Oil Associates strategist Tamas Varga said.
"For these reasons, although the current sentiment has turned negative and lower
prices are likely in the immediate future, the downside potential is limited,
too."
(Additional reporting by Henning Gloystein in Singapore; Editing by Dale Hudson)
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