Crude prices slump to almost 2-month as Brexit sparks demand concerns
London (July 6) Oil prices dropped for a second straight day on Wednesday, as worries over the global economy after the Brexit vote fueled concerns about energy demand.
A stronger dollar also added to pressure on the commodity markets.
Crude oil for August delivery CLQ6, -1.35% fell 54 cents, or 1.1%, to $46.09 a barrel, setting it on track for its lowest settlement since May 10, according to FactSet data. Brent oil for September LCOU6, -1.58% gave up 62 cents, or 1.3%, to $47.34 a barrel.
The moves continue a trend from Tuesday, when both contracts slumped more than 4%, as fears sparked by the U.K.’s vote to leave the European Union started to sink in.
Voters’ decision to Brexit has cast a cloud of uncertainty over the U.K.’s economy as well as over global financial markets. This has discouraged speculators from investing their money in riskier assets such as oil.
“Oil did find support overnight, though it looks poised for more downside today, given reports of an impending uptick in OPEC production,” said analysts at Accendo Market, in a note.
“Mounting concerns about Brexit weighing on global growth sentiment and a stronger USD on the back of the weak pound sterling are also playing their parts,” they added.
The ICE dollar index DXY, -0.02% rose 0.1% to 96.261, while the pound GBPUSD, -0.4300% touched a fresh 31-year low of $1.2798 overnight. Sterling has since trimmed losses to trade at $1.2959.
As markets slide, big banks are oversold
Sure, there are many reasons to worry about Goldman, JPMorgan, and other big financial institutions, but all that bad news is priced in.
Later Wednesday, attention will turn to the latest data on oil inventory in the U.S. when the American Petroleum Institute releases its weekly stockpile figures. The report comes ahead of official figures from the Energy Information Administration, due on Thursday. The API and EIA reports are usually issued on Tuesday and Wednesday, respectively, but were delayed because of Monday’s Independence Day holiday.
Elsewhere in the energy spectrum, gasoline RBQ6, -3.19% dropped 2.4% to $1.39 a gallon, while heating oil HOQ6, -0.90% fell 0.7% to $1.43 a gallon.
Natural gas NGQ16, -1.77% rose 0.8% to $2.79 per million British thermal unit.