Oil rose on Wednesday, June 29 as financial traders poured money back into commodities following the initial shock of Britain’s vote to leave the European Union, and as a potential strike in Norway and crisis in Venezuela threatened to cut supply.
Brent crude futures were trading at $48.95 per barrel at 0948 GMT, up 37 cents from their last settlement. U.S. crude was had climbed 44 cents to $48.29 a barrel.
Both oil benchmarks gained on Tuesday after markets shook off some of the shock from the referendum in Britain in which most voters chose to exit the EU.
“The risk-on tone should see commodities continue to push higher,” ANZ Bank said.
“Oil led the (commodities) sector as the shock of the UK voting to leave the EU wore off. Oil gains were solidified by news that the decline in Venezuela’s oil output appears to be accelerating, while a strike in Norway also looked like it would impact production,” it added.
Standard Chartered said that it expected oil prices to return to $50 per barrel rapidly after the Brexit-related fall as the referendum’s impact on demand was limited.
On the supply side, a looming strike by Norwegian oil workers threatened to cut output from the biggest North Sea producer.
In crisis-struck Venezuela, oil producers and refiners were struggling to keep output up due to power outages and equipment shortages, also supporting prices, traders said.
Additionally, the American Petroleum Institute (API) indicated in a report on Tuesday that U.S. crude inventories fell nearly 4 million barrels for the week to June 24, some two-thirds more than the 2.4 million barrels expected by analysts.
The U.S. Energy Information Administration will issue official stockpile data on Wednesday.
Despite the tightening supply-side, there are concerns that a looming refined products glut especially in Asia, which has halved benchmark Singapore production margins since January, might spill back into the crude market as refiners cut output and orders of their main feedstock, crude.
“Refining margins … have averaged lower than the same period last year, which should be supportive of lower fuels production,” said analysts at BMI Research.
Bankers also said that knock-on effects from Britain’s EU exit vote would continue to impact oil.
Citi said that Brexit’s “uncertainty and volatility … are both likely to be persistent for a long time to come”.
And investment bank Jefferies said: “Brexit … has brought currency considerations to the fore … Near-term, a strengthening U.S. dollar makes a barrel of oil more expensive in local emerging market currencies and so likely weighs on demand.”