Home >> Business

Oil bulls face turmoil on Brexit aftershocks

Crude went down 6.8 percent on June 24 hours after the British citizens decided to leave the European Union.

Oil bulls face turmoil on Brexit aftershocks

Some analysts, however, maintain that supply and demand still favor rising prices. The exit of Britain from the 28-nation bloc means that Europe's future will remain mired in uncertainty and it will also cast a shadow over the market.

"A vote for Brexit is a vote against globalization, against the free mobility of people and goods," said Francisco Blanch, head of commodities research at Bank of America Merrill Lynch in New York. "Any reversal in the growth of trade and mobility is bad for the commodities, except gold."

Global equities fell down after the decision, while haven assets such as the dollar and gold surged.

UBS AG said traders are now going to focus again on the fundamentals of the market as a global crude surplus fades. They will also need to take into account any lasting impact from the UK's decision on the world economy and oil demand.

According to data from the Commodity Futures Trading Commission, money managers across the globe were bullish in the run-up to the British vote and it boosted bets on rising crude prices in the week ended June 21. West Texas Intermediate rose 0.7 percent to $48.85 a barrel on the New York Mercantile Exchange in the report week.

"We were calling for $44 oil in 2016 on average, now we expect it in the low $40s, roughly $41," said Michael D. Cohen, an analyst at Barclays Plc in New York. "The 2017 forecast has been reduced by $3, from $60 to $57."

The shocking Brexit outcome moved the greenback, with the Bloomberg Dollar Spot Index climbing 1.8 percent on June 24, the biggest gain since October 2011.