Oil rebounds on fading Brexit impact, risk of Norwegian strike
London (Jun 28) Oil prices rose for the first time in three sessions on Tuesday, rebounding from a Brexit-fueled selloff that sent crude futures to a seven-week low on concerns of a slowdown in the global economy. The threat of a union strike by Norwegian oil and gas workers also lifted prices.
Crude oil for August CLQ6, +2.61% rallied $1.27, or 2.7%, to $47.60 a barrel, while Brent for the same month LCOQ6, +2.44% gained $1.20, or 2.5%, to $48.35 a barrel.
On Monday, both contracts settled sharply lower for a second straight session, as investors dumped energy as part of a wider global selloff in the wake of the unexpected U.K. vote last week to leave the European Union.
Markets stabilized a bit on Tuesday, with the pound GBPUSD, +1.2401% stopping its relentless slide, and European stocks SXXP, +2.63% and U.S. stock futures ESU6, +0.99% posting firm gains. The ICE U.S. dollar index DXY, -0.31% dropped 0.5% to 96.097, helping dollar-denominated commodities including oil.
Andrew Bary of Barron's says big banks such as JPMorgan look cheap, as do Delta and American Airlines. Even eBay looks oversold on the news.
“An easing in USD strength is serving to buoy the all-important commodities space while some cautious optimism is creeping back into the new trading week,” said analysts at Accendo Markets in a note.
“Expect economists’ outlooks over the coming days and weeks to dictate the direction of oil, however, a longer term slowdown in demand is seen as unlikely,” they added.
But supply issues also factored into Tuesday trading as up to 7,500 Norwegian oil and gas workers may be affected by a strike starting Saturday. The workers are demanding a new wage deal before midnight on July 1, the Wall Street Journal reported.
The strikes could limit production from Norway, which is one of Europe’s major producers.
The American Petroleum Institute will release preliminary estimates of crude storage later Tuesday.
Elsewhere in the energy space, gasoline for August RBQ6, +2.27% rose 3 cents, or 2.1%, to $1.52 a gallon, while natural gas for July NGN16, +2.61% gained 5 cents, or 1.9%, to $2.77 per million British thermal units.