OIL FUTURES: Crude settles lower as equity slide overshadows Ukraine, UAE tensions

Crude prices finished a volatile session lower Jan 24 as a stronger US dollar and a steep selloff in equity markets weighed on sentiment despite simmering geopolitical risks.

NYMEX March WTI settled down $1.83 at $83.31/b and ICE March Brent finished $1.62 lower at $86.27/b

Continued pressure on equity markets pulled oil lower, analysts said, amid growing concerns that an overly aggressive US Federal Reserve policy pivot could stunt growth outlooks.

"We are seeing a significant loss of confidence," OANDA senior market analyst Ed Moya said. "The market is especially concerned that the Fed is on a course that will derail growth."

"Wall Street is in liquidation mode and oil is not immune to that," Moya added.

Major US stock indices were down more than 3% midday as the market looked toward the upcoming Federal Open Market Committee, slated to start Jan. 25, for an update on the Fed's policy stance. A recent hawkish pivot in tone from Fed leaders has sent investors in search of safe havens, analysts said, a move that is supporting the US dollar and further exacerbating the crude price slide. The ICE US Dollar Index was holding around 95.88 mid-afternoon, on pace to close at a two-week high.

NYMEX February RBOB settled 4.44 cents lower at $2.3980/gal and February ULSD declined 6.38 cents to $2.6274/gal.

Despite the selloff, markets remained supported by a raft of factors, most notably concerns about a Russian invasion of Ukraine that could disrupt energy flows and continued tensions in the Middle East. The US State Department has ordered family members of US embassy staff in Kyiv to leave and the White House Jan. 24 said it is considering deploying troops to the Baltic states.

"A big issue is the gas fields on the Ukrainian-Russian border. But the market is pricing the geopolitical issues in, because even though there is a low probability a Russian invasion will happen, it will have a very big impact if it does," said Michael Poulson, senior oil risk manager at Global Risk Management.

Meanwhile, the UAE intercepted and destroyed two ballistic missiles launched by Yemen's Houthi militia, the country's ministry of defense said Jan. 24, nearly a week after the group's attack on a fuel depot in Abu Dhabi killed three people, S&P Global Platts reported earlier.

The UAE, OPEC's third-biggest oil producer, pumped 2.87 million b/d of crude oil in December, according to the latest S&P Global Platts survey of the OPEC+ producer group's output.

Both Russia and the UAE are important members of the OPEC+ group, which is currently finding it difficult to achieve agreed production levels. International Energy Agency data showed that OPEC+ oil production in December fell 790,000 b/d short of its agreed amount.