Oil extended losses to trade near $47 a barrel as the U.K. voted to leave the European Union, triggering a global flight from risky assets.
Futures lost as much as 1.5 percent in New York after slumping 4.9 percent Friday, the biggest drop in four months. The turmoil in financial markets continued Monday with the pound extending its selloff, while demand for haven assets including gold helped drive the precious metal higher. Oil prices may plunge further if the shock of Britain’s vote to exit the EU is combined with a boost in output, Russian Energy Minister Alexander Novak said.
Oil capped a second weekly drop on Friday as prices slid with industrial metals and European equities after the U.K. voted to quit the EU following more than four decades of membership. Nigerian output may return to about 2.2 million barrels a day next month after the repair of a pipeline as talks with militants continue, State Minister for Petroleum Resources Emmanuel Ibe Kachikwu said in Bloomberg television interview in Beijing.
“Everything is caught up in Brexit,” Evan Lucas, a market strategist at IG Ltd. in Melbourne, said by phone. “The oil fundamentals for the moment will be put to one side as markets try to figure out exactly how this will all work.”
West Texas Intermediate for August delivery slid as much as 72 cents to $46.92 a barrel on the New York Mercantile Exchange and was at $47.42 at 1:21 p.m. Hong Kong time. The contract fell $2.47 to $47.64 on Friday. Total volume traded was about 7 percent above the 100-day average.
‘Serious’ Drop
Brent for August settlement was down 7 cents at $48.34 a barrel on the London-based ICE Futures Europe exchange after falling as much as 1.3 percent earlier. The contract dropped $2.50, or 4.9 percent, to $48.41 on Friday. The global benchmark crude traded at a premium of 92 cents to WTI.
For a Gadfly commentary about Iran’s oil export boom waning, click here.
Returning production in Canada and Nigeria, which has been disrupted by wildfires and rebel attacks, combined with the Brexit result could mean “the drop in prices in the short-term may be serious,” Russia’s Novak said in an e-mailed statement. If supply isn’t restored, a return to fundamentals is likely fairly quickly, he said.
Oil-market news:
Nigerian output was at 1.8 million barrels to 1.9 million barrels a day as of two days ago, Kachikwu said, predicting prices may end the year between $50 to $55 a barrel. Money managers increased bets on rising WTI prices in the week ended June 21, according to the Commodity Futures Trading Commission. Rosneft PJSC will continue to strengthen its presence in the Chinese market, according to Chief Executive Officer Igor Sechin.
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