Oil prices higher, but Brexit worries waiting in the wings
London (Jun 17) Oil prices rebounded on Friday, snapping a six-day losing streak, as the dollar weakened and markets priced in a higher possibility that the U.K. will vote to remain in the European Union in a referendum next week.
Brent LCOQ6, +2.48% the global oil benchmark, rose 1.6% to $47.95 a barrel on London’s ICE Futures exchange. On the New York Mercantile Exchange, West Texas Intermediate CLN6, +1.97% futures were trading up 1.1% at $46.72 a barrel after posting the largest one-day loss since April on Thursday.
Risk assets across the globe rebounded after official campaigning in the U.K. was temporarily suspended following the killing of British lawmaker Jo Cox ahead of the vote on June 23. Cox was an advocate for the U.K. to stay in the EU.
The Stoxx Europe 600 SXXP, +1.02% rose 1.4% in early trade. Stocks in Asia mostly followed Wall Street higher Friday with Japanese shares rising 1.1% from a four-month low, while markets in Shanghai and Hong Kong climbed.
Analysts say that while a British exit from the bloc, or Brexit, may not have a direct effect on oil, the market could be hurt. The ensuing turmoil in the case of a Brexit could worsen sentiment for riskier assets such as commodities. Oil could also take a hit from a rising dollar, which analysts expect to strengthen if the U.K. votes to leave the EU.
Read: The Brexit vote: Everything you need to know about the referendum
With prices down around 5% for the week, oil markets were “seemingly spooked ahead of the Brexit vote,” said Jason Gammel, oil analyst at Jefferies.
On Friday, the dollar weakened, providing support for crude, which is priced in the greenback. The Wall Street Journal Dollar Index BUXX, -0.26% , which tracks the greenback against a basket of other currencies, fell 0.2%.
Still, the short-term outlook for the oil market remains hazy as supply outages, the main driver for the recent price rally, are winding down. Canada has restarted a bulk of its oil operations after the recent wildfires and Jefferies expects about 1.2 million barrels a day to come back online soon.
With prices now at levels that make drilling economical for some firms, U.S. oil rig counts, a rough proxy for activity in the industry, have increased for two weeks in a row. Baker Hughes Inc. BHI, -0.09% , which tracks the data, is set to release the latest weekly rig count later today.
Nymex reformulated gasoline blendstock for July RBN6, +2.53% — the benchmark gasoline contract — rose 1.5% to $1.49 a gallon. ICE gasoil changed hands at $427 a metric ton, up $3.50 from the previous settlement.