Oil losses mount as world markets hit by Brexit woe

AFP , Wednesday 6 Jul 2016

Oil prices fell further Wednesday, tracking losses across equities and currency markets as fresh fears about the impact of Britain's exit from the EU sent investors fleeing high-risk assets.

A warning from the Bank of England that there was evidence risks from the June 23 Brexit vote "have begun to crystallise" sent shudders through world markets, with the pound diving to levels not seen since mid-1985 and stock markets diving.

The uncertainty unleashed by Europe's second biggest economy leaving the European Union battered the oil market this week, with Brent diving 4.3 percent and West Texas Intermediate shedding 4.9 percent on Tuesday.

"The risk aversion that gripped equity indices was mirrored in the oil markets and heavy losses were registered across the board," said PVM analyst Stephen Brennock.

At around 1010 GMT Brent was down 23 cents at $47.73, while WTI eased 15 cents to $46.42.

Both contracts were off earlier lows seen in Asian trading, but well down from the levels above $52 touched at the start of last month.

"Uncertainties and concerns over how Brexit will influence the market is expected to last for a long time, increasing volatility in oil prices," Will Yun, commodities analyst at Hyundai Futures in Seoul, told Bloomberg News.

This, analysts said, would be triggered by investors unwinding recent fresh positions taken during the oil market's upswing.

"Given the sizeable overhang of speculative long positions that is still in place, this correction could well continue for some time," said analysts at Commerzbank.

They noted that a deadly suicide bombing near Islam's second-holiest site in the Saudi city of Medina had very little impact on the oil market.

"When such news fails to have any impact at all, this is often a sign that a correction is imminent," they warned.

Oil market players are now looking to the next set of official US stockpile data, due Friday.

"Even when we see a decline in stockpiles in the US, it's not strong enough to push prices up unless there are some major production cuts."

Adding to the downward pressure is news that oil cartel OPEC had boosted output in June, adding to an already painful global oversupply.

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