Oil prices fall amid an array of volatile influences - supply overhang, ‘Brexit’ uncertainty

22-Jun-16

Light, sweet crude for July delivery dipped to US$48.8 a barrel on the Nymex, while August contract fell to US$49.85 a barrel. Brent dipped to US$50.6 a barrel on ICE Futures Europe. Both fell for the seventh time in nine sessions, but pared losses that had been more than 2% earlier in the session, as per wsj.com.
Oil prices fell Tuesday but pared a lot of their losses late in the day as investors try to navigate an array of volatile influences on the market. Many expect supply outages to end in Nigeria and Canada, but others claim it will have little influence. New polls have caused quick-changing expectations on the U.K.’s referendum on European Union membership.
Analysts said that while a Brexit might not have an immediate impact on oil, the market could suffer collateral damage. A British EU departure could damp appetite for riskier assets such as commodities. Oil could also take a hit from a rising dollar, which analysts expect if the U.K. votes to leave.

Hazy prospects on the supply side of oil markets are also keeping some investors on the sidelines. Reports of a cease-fire between Nigeria’s government and rebels who have attacked the country’s oil facilities in recent months are further weighing on oil. The attacks have knocked out a significant amount of production, and if the cease-fire holds, output could return quickly to the market. This comes as Canada is gradually resuming its oil-sands production after weeks of wildfires, which was another reason for the recent rally. The market will also be watching Wednesday’s weekly U.S. crude stockpile data for cues. Increasing supply from Canada is likely to keep U.S. stockpiles rising, limiting any oil-price rallies.