Oil swings as rising rate angst vies with tight physical market

Oil swung in a volatile session as traders weighed tightness in the physical market against macroeconomic concerns that are clouding crude’s demand outlook.

West Texas Intermediate traded below US$89 a barrel in a volatile session, tracking equity markets. Traders are digesting messaging that the Federal Reserve will need to leave borrowing costs higher for longer, strengthening the dollar in the last few sessions. 

“Oil’s downward move has very little to do with fundamentals and all to do with rising Treasury yields and the stronger U.S. dollar,” said Warren Patterson, head of commodities strategy at ING Groep NV. “I still think oil has some room to move higher. Fundamentally, it is looking constructive.”