Singapore — 0549 GMT: Crude oil futures were lower during midafternoon trade in Asia Feb. 26 as a risk-off sentiment in equities markets added downward pressure to oil prices, further hurt by rising bond yields pushing the dollar up.
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At 1:49 pm Singapore time (0549 GMT), ICE April Brent crude futures fell 67 cents/b (1%) from the Feb. 25 close at $66.21/b while the NYMEX April light sweet crude contract was 74 cents/b (1.16%) lower at $62.79/b.
"[A] stronger Dollar, especially against Asia [equities markets] and higher bond yields, led to the selling of long-duration assets," said Stephen Innes, chief global markets strategist at Axi, in a note Feb. 26
"Stocks are capitulating, and the domino effect is starting to hit commodities like oil triggered by a correction in the reflation trade due to higher US yields that are becoming a significant source of market volatility."
The dollar index, which is measured against a basket of currencies, reached a high of 90.362 early Feb. 26 in Asia after starting the day at 89.860.
Analysts though generally agreed that despite the fall in prices, fundamentals in the oil market remained supportive.
With COVID-19 vaccine rollouts hoped to stem the spread of the pandemic, the market has begun to view the demand outlook for oil with a bullish hue, all while expecting supplies to remain tight in the aftermath of severe weather seen in the US.
The March 4 OPEC+ meeting is expected to offer guidance into the coalition's production plan going forward. Market analysts have said following the recent rally in oil prices, there are signs of differences between members who want to raise production and those who want to keep production steady.
"Members would surely be getting itching feet watch prices surge higher," ANZ analysts said in a note Feb. 26.
"This places even more pressure on Saudi Arabia, who went alone to cut output by 1 million b/d at the last meeting in January. At that meeting, producers such as Russia were able to get higher quotas approved."