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Oil futures declined Monday, caught up in a selloff among risky assets as prices extended a pullback after rising last week to their highest levels in more than seven years.
Oil remained underpinned, however, by worries over potential disruptions as traders monitored rising tensions over Ukraine and the interception of missile attacks by Yemen’s Houthi rebels on the United Arab Emirates.
“While fundamental and political forces remain positive for crude oil, those appear to be getting overwhelmed by market forces” Monday, Colin Cieszynski, chief market strategist at SIA Wealth Management, told MarketWatch.
“Last week, crude oil had become technically overbought and was getting due for a trading correction, which has started to unfold,” he said. “The catalyst for this appears to be a general rotation of capital out of equities and commodities and into defensive havens like bonds and gold.”
Oil’s decline Monday came as U.S. stock benchmarks declined sharply ahead of Wednesday’s Federal Open Market Committee decision on monetary policy and a wave of earnings reports.
West Texas Intermediate crude for March delivery
CL00,
CLH22,
fell $1.91, or 2.3%, to $83.23 a barrel on the New York Mercantile Exchange. March Brent crude
BRN00,
BRNH22,
the global benchmark, was down $1.70, or 1.9%, at $86.19 a barrel on ICE Futures Europe. Both Brent and WTI lost ground Friday, but logged a fifth straight weekly gain after closing at seven-year highs on Wednesday.
Meanwhile, “the further escalation of the Ukraine conflict and the fraught security situation in the Middle East justify a risk premium on the oil price because the countries involved — Russia and the U.A.E. — are important members of OPEC+. And the extended cartel is finding it hard in any case to achieve the agreed production level,” wrote Carsten Fritsch, analyst at Commerzbank, in a note.
The U.S. State Department over the weekend ordered the families of U.S. diplomatic personnel to leave Ukraine, as concerns grow about an imminent Russian invasion, with the U.S. threatening sanctions if Moscow invades its neighbor. NATO is putting extra forces on standby and sending ships and jets to Eastern Europe.
See: How a Russian invasion of Ukraine could trigger market shock waves
Also read: Tensions between Russia and Ukraine aren’t fully priced into commodities
And the United Arab Emirates said it intercepted two ballistic missiles targeting its capital, Abu Dhabi, with Houthi rebels blamed for brewing conflict in the region. Oil prices were lifted last week after the Iran-aligned Houthis claimed responsibility for an attack that targeted a key oil facility in Abu Dhabi, killing three people.
Also on Nymex, February gasoline
RBG22,
lost 1.5% to $2.405 a gallon and February heating oil
HOG22,
fell 1.5% to $2.651 a gallon.
Natural-gas futures for February delivery
NGG22,
traded at $4.007 per million British thermal units, up 0.2%.
