Oil prices reacted poorly when the news came that UK voters had opted on Thursday to leave the European Union. Futures for crude oil took a definite tumble in a reversal of previous gains after a day of the market watching the Brexit voting in the United Kingdom.
On the NYMEX, benchmark light sweet crude fell 6.8 percent to $46.70/bbl. during the Asian trade; this after settling at 2 percent higher during trading in the United States.
Prices for Brent crude fell by 6.6 percent to $47.54/bbl. Prior to that, those prices had settled at $50.91/bbl.
Angus Nicholson, an IG analyst, predicted that oil prices could see more losses, as the specter of a global recession is raised due to uncertainty over the future of the European Union. However, other analysts were of the opinion that the price decline would be a short-term affair.
Oliver Jakob of Petromatrix, a Swiss company, opined that "the core oil fundamentals remained unchanged" and said that many traders might adopt a wait-and-see attitude. However, SEB Markets analyst Bjarne Scheildrop warned that last week, oil was down to $49.64/bbl. He said it would have been "strange" if the market did not beat that low. Related: Shell's Ambitious Plan To Topple Exxon
It's expected that investors will prepare to trade off volatility in prices due to the climate of uncertainty. In the wake of the referendum BP stated: "We do not currently expect it to have a significant impact on BP's business or investments in the UK and Continental Europe, nor on the location of our headquarters or our staff."
If the Baker-Hughes rig count, which will be released later in the day, shows an increase, prices may fall even further.
Adding to the speculation about the future of the situation in Europe. Scotland had voted to remain in the European Union, and leaders there expect a new vote on Scottish independence. Geert Wilders, who heads the Dutch anti-immigrant party PVV is calling for similar vote in the Netherlands. The idea has support in the country.
By Lincoln Brown for Oilprice.com
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