Three opinion polls have shown that British voters could potentially vote to remain in the EU. The markets have cheered in the wake of such reports.
With polls showing a diminished chance of a Brexit from the European Union, investor’s confidence in the market has seen a boost. These have had a repercussion in the oil market which is seeing a rally.
Brent crude futures for August were up by 90 cents at $50.07 a barrel on 0843 GMT. They could potentially gain 6% in the next two trading days. While NYMEX crude for July delivery, which is set to expire today, is up by 80 cents at $48.78 a barrel.
Campaigning for Britain’s referendum had resumed on Sunday after a 3-day hiatus in the wake of the murder of Jo Cox, a pro-EU Labour lawmaker.
Three opinion polls have shown that the ‘Remain’ camp has received a much needed momentum after the ghastly incident, although the overall picture has remained that of an even split.
Investments which had been perceived as safe havens, including the gold, German bonds, Swiss franc and the U.S. dollar have come under heavy selling pressure, while oil is set to rise for its second consecutive day. Even metals and equities rallied in the market.
“For oil as a risky asset, what we’ve seen are intraday gyrations that are coming from the spillover effects of ‘risk-on/risk-off’ moves that follow the poll numbers,” said Harry Tchilinguirian, head Commodity Strategy at BNP Paribas.
In the forex market, the pound surged ahead by 1.6% to rest at $1.4589, thus extending its recovery from its two month trough of $1.4013.
“With Brexit dominating the market headlines, it might be moves in the U.S. dollar that drive the oil market at least until we get that out of the way,” said Michael McCarthy, chief market strategist at CMC Markets in Sydney. “It’s likely to be a nervous and skittish week’s trading.”
Despite the streaming in of data from the U.S which showed that U.S. energy firms have been adding oil rigs for a third week in a row, which goes to suggest higher oil flow rates in the near future, oil prices continued their upward march.
Baker Hughes has reported the addition of nine oil rigs from June 17.
As per McCarthy, apart from concerns arising from Brexit, the markets are likely to be caught up in a momentum from a range of gains and thus the addition of more oil rigs in the United States has not had any significant impact on it, yet.
“Capping market gains at the moment is the potential for those very agile U.S. producers to jump back into production should we see any further substantial rises,” said McCarthy.
Categories: Economy & Finance, Strategy
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