Crude futures move higher in London and New York but remain below pre-EU referendum $50 highs
Oil rallied yesterday in both London and New York, with Reuters reporting it added around three per cent as wider markets rebounded following a post-Brexit crash.
Brent crude, which sets prices in the North Sea, among other areas, was up around one per cent for the session to a little above $49 a barrel at 11am in London today.
Having fallen below $48 at one point earlier this week, as the fallout from the UK’s shock referendum result reverberated around markets, prices gained support from a looming strike in Norway.
This should help maintain the temporary balance between supply and demand across the global market that followed production outages in Canada, Nigeria and elsewhere. Analysts expect this to be effectively confirmed by a sixth consecutive fall in US stockpiles figures later today.
But the reality is the rise is almost certainly being primarily driven by a recovery for the pound and dip in the resurgent dollar. After a one per cent advance yesterday, sterling is up another 0.4 per cent today to close to $1.34.
It is too early to say that the fall in the pound is done, analysts say. It took five months and several false dawns after the UK crashed out of the European Exchange Rate Mechanism in 1992 before the currency eventually found a price floor.
“I would categorise today’s current move higher as a corrective move after the strong push lower since last Thursday,” Dominick Chirichella, a senior partner at the Energy Management Institute in New York, said.
“More time is needed to safely say the down move in oil is officially over.”
Once the Brexit smokes clears, the fundamentals on supply and demand will come into focus – and that may not support significantly higher prices in the mid-term.
Oilprice.com reports the International Energy Agency’s latest report, published yesterday, predicts the return of production in key areas will swing the market back into surplus by early next year and that the drawdown for 2017 as a whole could be a minimal 100,000 barrels.
