Oil fell for a third day on Feb. 6, 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 Feb. 5 and measures of volatility spiking to multi-year highs, reflecting heightened investor nervousness, oil has not suffered to the same extent.
Brent crude futures were down 66 cents on the day at $66.96 a barrel (bbl) by 5:55 a.m. CST (11:55 GMT), but are still up 1% so far in 2018. U.S. West Texas Intermediate crude futures fell by 55 cents to $63.60.
Since the S&P 500 hit a record high on Jan. 26, the index has lost 8%. Oil has shed 4.5%, while cryptocurrency bitcoin 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.
"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."
Financial markets sank on Feb. 5 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 bbl/d cut in supply by OPEC and Russia, and a surge in U.S. crude output above 10 million bbl/d, 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."