HOUSTON (Feb 6): Oil prices settled lower on Monday as rising U.S. output, a weaker physical market and recent dollar strength added to the pressure from a widespread decline across equities and commodities markets.
Brent crude futures closed down 96 cents, or 1.4 percent, at $67.62 a barrel after hitting a session low of $66.98 a barrel.
U.S. West Texas Intermediate (WTI) crude settled down $1.30, or 1.99 percent, at $64.15.
"To me this looks like a good old fashioned get-me-out trade. It is hard for me to get real bearish in crude given that the global economy is doing well," said Bill O'Grady, chief market strategist at Confluence Investment Management in St. Louis, Missouri.
U.S. stocks plunged in highly volatile trading on Monday, with the Dow industrials and S&P 500 posting their biggest one-day percentage drop since August 2011. With Monday's declines, the S&P 500 erased its gains for 2018 and is now down 0.9 percent this year.
The sell-off in the stock market came after a monthly U.S. jobs report on Friday that showed the fastest wage growth in nearly nine years exacerbated a broader market sell-off that was already under way as European stocks backed off record highs and a rising dollar dented commodities prices.
"There was a lot of fear in the marketplace the economy is going to be too good, which was already priced in the recent oil rally, and that trickled down in the oil market," Phil Flynn, analyst at Price Futures Group in Chicago.
"What’s good about this correction is that it is based on bullish economic news. I think the minute we see stocks get stability I think you’ll see oil price stability as well," he added.
Although volatility in oil is rising, it is still close to its lowest in three years.
Oil, which recently hit the highest levels in nearly three years, has also been pressured by rising U.S. crude production, which could threaten the Organization of the Petroleum Exporting Countries' effort to support prices.
U.S. government data last week showed output climbed above 10 million barrels per day in November for the first time since 1970.
Analysts expected U.S. crude supplies would post a weekly rise for the second straight week, a preliminary Reuters poll showed on Monday. Industry group American Petroleum Institute posts its data on Tuesday and the U.S. Energy Information Administration reports on Wednesday.