Oil prices fell about 2% yesterday, weighed by a rallying dollar and continued market uncertainty over the UK’s shock vote to exit the EU.
Brent and US crude futures have lost about 7% since Thursday’s settlement after the so-called Brexit vote sent global risk assets plummeting as investors fled to safe havens such as the dollar, US Treasuries and gold.
Analysts at Goldman Sachs and other research houses sought to allay fears over the impact of the EU crisis on oil specifically, pointing out that the UK’s demand for fuel is negligible at the global level.
Oil prices rose slightly early yesterday on some of that sentiment, before slipping again.
Market intelligence firm Genscape’s report of a draw of more than 1.3m barrels at the Cushing, Oklahoma, delivery point for US crude futures provided little support.
Brent crude was down $1 at $47.36 a barrel, while US crude slipped $1.07 to $46.57.
The dollar was up almost 1%, near Friday’s three-month high, making oil and other commodities priced in dollars less attractive to holders of the euro and other currencies.
Goldman Sachs said even if UK economic growth suffered a 2% drop in response to Brexit — on the high end of its estimates — Britain’s oil demand would likely be reduced by only 1%, or 16,000 barrels per day, or 0.016% of global demand.
“This is extremely small on any measure,” Goldman Sachs analysts said.
Morgan Stanley said it was more concerned about a growing glut in refined oil products.
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