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Brexit latest: oil tumbles as shock from UK result hammers prices

All times UAE

12.45pm

European oil and gas producers fall after Brexit vote cuts oil prices by 4 per cent. Oil demand is curbed as the global economy is likely to take a hit, dragging down prices; Brent crude is down 3.99 per cent at US$48.86 as at 07.39 GMT; West Texas Intermediate is down 4.01 per cent at $48.09

“Bad economies in the UK and Europe are not good for oil and there could be a domino effect on other economies in Asia,” said theIHS oil analyst Victor Shum

Top fallers so far are Saipem (down 11 per cent), Amec Foster Wheeler (down 9.8 per cent) and Repsol (down 9 per cent).

The Italian power company ENI, down 8.5 per cent, is set for its worst day in more than 7 years while the French oil major Total abruptly ends a 7-day winning-streak

Across the continent, oil stocks are down on average 8 per cent with the Europe’s two main energy indices down 7.8 per cent and 8.3 per cent, respectively, both set for their worst day since mid-August 2015.

11.25am

Oil tumbled with most commodities amid a global flight from risky assets as the U.K. voted to leave the European Union.

Futures plunged more than 6.6 per cent in New York and London, the biggest intraday drop in more than two months. Haven assets such as gold and the yen surged. Crude will likely be affected by a stronger US dollar and slower global economic expansion in the near-term, Morgan Stanley said in a note. A boost in the currency crimps the appeal of commodities priced in the dollar.

Oil slid with industrial metals as the pound plunged to the lowest since 1985 and European equities slumped as the UK voted to quit the EU after more than four decades. Central banks and governments have warned an exit will hurt economic growth and trigger volatility in financial markets. Almost 52 per cent of voters sided with the “Leave” campaign.

“If the Brexit vote progresses and spills over into a much bigger global recessionary concern which hurts global demand, that’s probably the biggest risk for oil,” said Angus Nicholson, a markets analyst in Melbourne at IG. “It’s going to be a very difficult and long process for the UK to untangle itself from EU laws and every minor debate holds a major selloff risk.”

West Texas Intermediate for August delivery fell as much as US$3.41, or 6.8 per cent, to $46.70 a barrel on the New York Mercantile Exchange and was at $47.62 at 7:58am London time. Total volume traded was almost six times above the 100-day average. WTI is down 0.7 per cent for the week, set for a second weekly drop.

Brent for August settlement dropped as much as $3.37, or 6.6 per cent, to $47.54 on the London-based ICE Futures Europe exchange. Prices are 1.6 per cent lower this week. The global benchmark crude traded at a premium of 77 cents to WTI.

Oil will face a wave of risk aversion, but the market’s shift from oversupply to balance will overwhelm the currency impact of a leave vote, Société Générale said in report June 21. Crude in New York has advanced more than 75 per cent from the lowest level in 12 years in February as disruptions from Nigeria to Canada and falling output in the US eased a global surplus.