(Bloomberg) -- Oil held onto the previous day's drop as macroeconomic concerns overshadowed physical market tightness to cloud the demand outlook.
West Texas Intermediate traded near $89 a barrel after declining by 2.2% in the previous session. A global rout in sovereign bonds and shares extended into Tuesday, while the dollar strengthened as traders digested messaging that the Federal Reserve will need to leave borrowing costs higher for longer.
Fears over the global economy have seen WTI drop about 6% since last Wednesday's close, halting a rally that saw it surge to $95 a barrel last week. Higher interest rates make it more expensive to store and ship crude and the strengthening dollar means it's pricier for most buyers. The reversal has come despite a spate of buying of key oil grades by the trading arm of China's top refiner.
“Oil's downward move has very little to do with fundamentals and all to do with rising Treasury yields and the stronger US 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.”
OPEC+ ministers will meet to review global markets on Wednesday. Delegates from the grouping don't expect the panel to recommend any policy changes.
--With assistance from Rob Verdonck.
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