Oil futures fall on Brexit concerns, global growth
The Dollar Business Bureau
Oil futures prices declined on Tuesday, over investor’s concerns on next week's vote on UK’s likely exit from European Union; this impacted the global financial markets, lowering the signs of recovering crude prices.
Considered safe investments like the German Bunds and Swiss Franc rallied, whereas equity markets and industrial products, considered sensitive to economic uncertainty, declined after the polls showed that UK’s ‘Out’ campaign is leading before a vote on membership in the EU.
This outshone a more positive prediction for growth in oil demand from the International Energy Agency (IEA), which stated that the oil market is quite balanced after oversupplies of two years.
The futures of Brent crude oil declined by 69 cents to $49.66 per barrel at 0842 GMT, falling for the fourth consecutive day. The campaign in favour of UK’s ‘Exit’ from EU has gained a lead over the ‘In’ group before the referendum of June 23, as revealed by ICM’s two opinion polls on Monday.
Mihir Kapadia, CEO, Sun Global Investments said that the risk-off temperament that has been prevalent in the oil markets in the past few days has taken control of crude prices, with sluggishness in the Asian markets and a robust dollar leading to Brent crude falling back below the $50 mark.
Highlighting the grave concerns of investors over the possibility of a vote to exit the EU, called as ‘Brexit’, instability in the British pound reached its maximum in around 20 years, surpassing the heights seen when Lehman Brothers, US investment bank, bankrupted in 2008 economic crisis.
The growth concerns of China’s economy are also weighing in on the mood, which could put aside positive forecast of the US government that predicts output of shale oil to decline in July for 17th month in a row.
The forecast by OPEC on Monday mentioned that the global oil market would be more stable in the second half of this year as outages in Canada and Nigeria helped in bringing down its excess supply.