Oil Ends the Day Higher
Oil Ends the Day Higher
NEW YORK (DTN) -- New York Mercantile Exchange oil futures ended higher Monday afternoon as easing fear over an exit by Britain from the European Union pressed the dollar sharply lower.
"The Brexit issue was a big part of the reason we have risk-on trade today because there was concern if the United Kingdom votes to leave the EU, then we could have a recession in Europe. But now that looks unlikely, so we are having a relief rally," said analyst Phil Flynn at Price Futures.
Flynn also cited concerns over strikes by oil workers in Norway and Nigeria, as well as extreme heat conditions in California and the Southwest region that triggered a rally for natural gas prices.
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NYMEX July West Texas Intermediate futures gained $1.39 to $49.37 bbl at settlement, near a 10-day high of $49.42. The July WTI contract expires Tuesday. The August WTI contract settled up $1.40 at $49.96.
On the IntercontinentalExchange, August Brent futures climbed $1.48 to $50.65 bbl settlement, off a 10-day high of $50.68 on the spot continuation chart.
In products trade, NYMEX July ULSD futures rallied 4.57cts to $1.5274 gallon settlement, near a $1.5282 one-week high. July RBOB futures spiked 7.74cts to a $1.5827 gallon settlement and near a $1.5849 10-day spot high.
On Wall Street, the three major stock indices rose more than 1%, with blue-chip Dow Jones Industrial Average posting a 200-point gain on risk-on trade. In currency trade, the dollar fell to an 11-day low versus a basket of six major currencies. The British sterling pound gained 2% follow weekend opinion polls showing a change in voter sentiment, with those hoping Britain would stay in the EU up 3% over those who want to exit the bloc.
Concern over an exit from the EU by Britain spurred worries over economic growth last week and several central banks reacted by leaving interest rates unchanged.
On fundamentals, oil demand this year has so far outpaced expectations, prompting the International Energy Agency last week to revise higher its oil demand growth forecast for 2016 by 200,000 bpd to 1.3 million bpd. Unplanned supply disruptions in Canada and Nigeria tightened the oil market last month, according to the Energy Information Administration. Canadian production is slowly returning to normal.
IEA last week said oil supply and demand would come into balance earlier than previously thought, in the second half of 2016 instead of early 2017. Other analysts were skeptical about further gains in oil futures however, saying the market remains vulnerable to bearish news.
George Orwel can be reached at george.orwel@dtn.com
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