The development will revive oil industry fears that major producers are embarking again on a battle for market share, especially after Riyadh threatened to raise output steeply if no freeze deal were reached.
SINGAPORE: Oil prices suffered fresh losses in Asian trade on Monday as the fallout from last week’s decision by Britain to leave the European Union (EU) batters confidence and ushers in a period of uncertainty.
Global markets took a beating on Friday, with some US$2.1tril wiped off valuations and the British pound plunging to 31-year lows against the dollar, while oil prices slumped more than 5%.
On Monday, crude fell further. At about 0400 GMT, the US benchmark West Texas Intermediate fell 26 cents, or 0.55%, to US$47.38 and Brent shed 15 cents, or 0.15%, to $48.26.
Both contracts have tumbled almost 10% from their 2016 highs touched earlier this month.
“While the oil market fundamentals will ensure no major drop in the price of crude, as the UK accounts for less than 2% of global demand, the oil markets are likely to remain under pressure until the volatility in the financial markets comes down,” said EY Services oil and gas analyst Sanjeev Gupta.
“Everything is caught up in Brexit,” Evan Lucas, a market strategist at IG Ltd. in Melbourne told Bloomberg News.
“The oil fundamentals for the moment will be put to one side as markets try to figure out exactly how this will all work,” he added.
Adding to the downward pressure on crude is the strengthening of the dollar, with traders fleeing to the currency’s relative safety.
A stronger dollar makes dollar-priced commodities like oil more expensive for those using other currencies - AFP
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