SINGAPORE (Dow Jones)--Crude-oil futures fell in Asia Monday as a stronger U.S. dollar and weaker regional equities added to bearish momentum.
Crude-oil markets are under pressure as more barrels are flowing amid a potential threat to demand from hiccups in the global economic recovery.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $90.28 a barrel at 0640 GMT, down $0.88 in the Globex electronic session. August Brent crude on London's ICE Futures exchange fell $1.76 to $103.36 a barrel.
A decision late last week by the International Energy Agency to release 60 million barrels of oil into the market on top of already rising production from Saudi Arabia is still weighing on market sentiment, more so because it is rare that both major producers and consumers have nearly simultaneously taken action to drive prices lower.
"Prices continued to fall...not only because of the expectation for more physical supply but because the action may also signal that policymakers have run out of options to stimulate the economy," MF Global analysts said in a research note.
Oil market sentiment has already been pressured by concerns over the pace of economic recovery in the U.S. and fears of a worsening financial crisis in the euro zone.
Analysts say the IEA's release of stocks could eventually turn price-positive as member countries begin buying again to rebuild inventories, but higher output from Saudi Arabia and financial factors will continue to have a greater impact on oil prices in the short term.
Brent crude futures were hit harder by the IEA's announcement last week because European end users were more heavily impacted by reduced supply of light, sweet crudes from Libya after unrest started in the North African country. Brent's premiums to rival Nymex WTI contract expanded to historically wide levels after the Libyan conflict began.
Brent's premium to WTI has narrowed since the IEA's announcement, with the North Sea crude's market structure flipping into contango, which could prompt traders to stock barrels at sea.
"Such a phenomenon can become self-perpetuating as widening contangos force larger inventory builds that in turn, induce larger contangos," said Jim Ritterbusch at Ritterbusch and Associates. The result would be increased downward pressure on prompt crude-oil prices.
Nymex reformulated gasoline blendstock for July--the benchmark gasoline contract--fell 216 points to $2.7550 a gallon, while July heating oil traded at $2.7377, 126 points lower.
ICE gasoil for July changed hands at $864.75 a metric ton, down $9.75 from Friday's settlement.
-By Gurdeep Singh, Dow Jones Newswires; 65-6415 4064; gurdeep.singh@dowjones.com
