Oil steady, but refined products glut looms

Brent crude futures were down 15 cents at $48.26 a barrel at 0238 GMT on Monday vis a vis $48.41 on Friday.

Despite this, the bank added that “the medium term trend towards oil market rebalancing appears in place, barring a recession”, implying that oil prices would likely remain stable or rise as a supply overhang that pulled down prices by as much as 70 percent between 2014 and early 2016 is gradually brought down, bringing production back in line with consumption.

Oil prices may plunge further if the shock of Britain’s vote to exit the European Union is combined with a boost in output, Russian Energy Minister Alexander Novak said. Crude in NY has still risen about 80 percent higher from a 12-year low in February as supply disruptions from Nigeria to Canada and falling USA production trim a global surplus.

The British pound hit 31-year lows and the dollar a 3-1/2 month high.

Brent crude was down $1 at $47.36 a barrel around 10:30 a.m. EDT (1430 GMT), while USA crude slipped $1.07 to $46.57.

USA crude was down 25 cents at $47.39 a barrel, after closing down $2.47, or 4.9 percent, on Friday. A stronger dollar makes dollar-priced commodities like oil more expensive for those using other currencies.

Oil prices rose slightly early on Monday as analysts said Britain’s European Union exit would have very little impact on physical oil trading – before slipping back later.

After the results of “Brexit” vote surfaced the crude oil prices tumble nearly 6.8 percent on June 24 but according to some of the analysts, the supply and demand equation is continuing to favor the price increases.

Oil is “near-term fundamentally balanced and the leave vote is unlikely to change that”, Goldman said.

Goldman Sachs said even if United Kingdom economic growth suffered a 2 percent drop in response to Brexit – on the high end of its estimates – Britain’s oil demand would likely be reduced by only 1 percent, or 16,000 barrels per day, or 0.016 percent of global demand.

“This is extremely small on any measure”, it said.

Of more concern to the market on Monday was a growing glut of refined products.

PVM’s Tamas Varga said given Brexit’s limited impact on global oil demand in the foreseeable future, a tightening in the oil market remained on the cards in the second half of the year.