Oil prices rise on Norway strike threat; Brexit shock fades

The lower prices were a result of a higher supply outlook as well as concern over a slowing economy, compounded by Britain’s vote to leave the European Union.

Brent for August settlement, which expired Thursday, fell 93 cents, or 1.8 percent, to $49.68 a barrel on the London-based ICE Futures Europe exchange.

“We played on that curve to widen out and it was good for us”, said Tariq Zahir, crude spreads trader for Tyche Capital Advisors in NY. The price action also suggests that investors may feel the Brexit events are a disaster for the United Kingdom and Euro, but not necessarily the U.S. The Dow Jones Industrial Average added more than 150 points.

“With Brexit chatter ratcheting down, I think we’ve seen a short-term bottom of $45.98 and that we will hang out between $47 to $51 for the next week or two”, he said. Nearly one in ten gas stations is selling gas for $1.99 or less.

“Venezuela is a progressively growing risk for the oil market as domestic unrest may translate into large-scale production outages, removing substantial volumes from the oil market”, said Giorgos Beleris, analyst at Thomson Reuters’ Oil Research and Forecasts.

U.S. West Texas Intermediate (WTI) crude was trading at $48.18, down 15 cents day on day.

Brent has risen by 85 percent since reaching a 12-year low in January, supported by expectations that a glut that has been weighing on prices since 2014 would start to ease and by unplanned losses from Canada to Nigeria.

Investors were also counting on a sizeable and a sixth weekly drop in U.S. crude stockpiles, with oil market analysts polled by Reuters forecasting a 2.4 million-barrel drawdown.

British bank Barclays, for instance, cut its price forecasts by $3 a barrel for both oil benchmarks, forecasting Brent at $44 and WTI at $43 for the remainder of 2016.

Putting a floor under prices was a modest weakening in the US dollar, which had rallied sharply in the wake of the Brexit vote.

The American Petroleum Institute (API) indicated in a preliminary report that crude inventories could have fallen almost 4 million barrels for the week to June 24, some two-thirds more than the 2.4 million barrels expected by analysts.

A strengthening USA currency – considered a safe investment in times of turmoil – will likely continue to dampen demand for dollar-priced oil which would become more expensive for holders of weaker units, Aw added.