epa05312159 A vehicle passes the Chevron Oil Refinery in Cape Town, South Africa, 17 May 2016. According to reports, continued petrol price increases in 2016 have had a ripple effect across commodity prices, inflation and interest rates. The California based US company Chevron’s South African unit operates a 110,000 barrel a day refinery in Cape Town. EPA/NIC BOTHMA
NEW YORK: World oil prices plunged over US$2.00 a barrel Friday amid a surging dollar and financial markets turmoil after Britain’s surprise vote to leave the European Union.
Around 1440 GMT, both the US and London benchmark crude futures contracts were down 4% or more, after having clawed back sharper losses from earlier in the day.
West Texas Intermediate for August delivery lost US$2.04 (4.0%) at US$48.07 a barrel. When trade opened WTI fell to US$47.57.
In London, Brent North Sea crude for August delivery, the international benchmark, was down US$2.21 (4.3%) at US$48.70 a barrel. It had traded as low as US$47.54 hours earlier.
Britain’s historic vote to withdraw from the European Union sent shudders through global markets Friday amid concerns about the decision’s negative impact on the global economy.
“The election in the UK has driven the dollar sharply higher and sent oil prices tumbling,” said Gene McGillian of Tradition Energy. A stronger greenback makes dollar-priced crude more expensive for buyers using rival currencies.
McGillian noted the uncertainties surrounding Britain’s withdrawal from the EU, “especially how this impacts the global economy and energy demand.”
Tim Evans of Citi Futures cautioned that Friday’s oil market moves are just an initial reaction and not the full price adjustment to Britain’s decision.
He offered the possibility of a short period of consolidation or upward correction, with some argument that none of the supply and demand fundamentals for the market have changed.
“However, we think confidence has been shaken and that the lack of physical tightness exposed by the initial decline will be highlighted, leading to a further wave of selling,” Evans said. - AFP
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