The UK’s surprising vote for Brexit has brought a new level of uncertainty into the markets. Shortly after the UK has voted to leave the European Union, the investors started withdrawing from the international oil and gas market and the oil prices started to falter. US Crude fell by $1.54 to $48.58 a barrel, while Brent Crude fell by $1.47 to $49.44 a barrel, according to AO Markets. Analysts further estimated that crude oil inventories would fall by at least 1.7m barrels, so far, they fell by 0.9m barrels, recent data by the Energy Information Administration (EIA) showed.
The Edge Markets explained that after the Brexit vote spurred huge volatility across markets, the crude investors have fled for safety by moving their funds into US dollar assets, which pushed down the price of oil.
The source added that now that the UK has very high chances to face a recession in 2017, markets are currently expecting the GDP growth to come under great pressure, which will most probably keep the oil prices trending downwards. An analyst at S&P Global Market Intelligence, Stewart Glickman, was quoted saying that “to the extent that GDP growth dissipates, crude oil prices could again suffer.”
Glickman has advised the crude investors to focus on the large oil and gas players that run upstream operations as well as downstream refining businesses. ExxonMobil, Chevron, and Occidental Petroleum are examples of the big players that have higher chances to withstand the weak crude oil prices for longer periods.