NEW YORK (DTN) -- New York Mercantile Exchange oil futures were lower at the start of regular trade Tuesday morning, retreating from Monday's 10-day highs amid profit-taking after two days of gains and forecasts showing increases in U.S. weekly product inventories.
Trading sentiment is cautious ahead of the June 23 British referendum on European Union membership and the volatility in the market reflects the political volatility.
Two polls over the weekend showed the campaign for Britain leaving the EU down 3 points, which boosted the market on Monday. But today two new polls were mixed, with one showing the campaign to remain in EU up 7 points while another showed the leave camp up 3%.
Concerns over an exit from the EU spurred worries over economic growth last week and several central banks including the U.S. Federal Reserve reacted by leaving interest rates unchanged.
Analysts said a rally on the back of polls was always going to be very tenuous, so the market is expected to remain volatile before the vote set for Thursday.
At 9:00 AM ET, NYMEX July West Texas Intermediate crude futures fell 96cts to $48.41 bbl ahead of the contract's expiration at the close of trade later this afternoon. August WTI was down 97cts at $48.99.
The August Brent crude contract on the IntercontinentalExchange tumbled $1.13 to $49.52 bbl.
In products trade, NYMEX July ULSD futures dropped 3.88cts to a $1.4886 gallon open, while July RBOB futures were 2.86cts lower at $1.5541 gallon.
On Wall Street, equities advanced on risk-on trade amid growing hope the economy will continue to recover without any impact from the United Kingdom's EU referendum.
The general consensus now is Britain will vote to remain in the EU and avoid any disruption to investment and the economy in general. Analysts said the Brexit risks have also been priced in already.
The market welcomed comments by Mario Draghi, the European Central Bank president, who said today at the European Parliament that further stimulus measures to jumpstart economic growth are in the pipeline, while inflation remained subdued and downside risks still significant. U.S. Federal Reserve Chair Janet Yellen will testify before Congress today on the U.S. economy.
In currency trade, the dollar reversed up but remained near a two-week low because of the Brexit debate and ahead of Yellen's comments.
Also pressing down oil futures was a report from Nigeria showing the government has signed a 30-day ceasefire with militants whose attacks recently have curtailed the country's crude oil exports.
Supply disruptions in Nigeria and Canada had boosted oil prices in recent weeks, although Canadian oil sands production is gradually returning to normal after as much as 1.0 million bpd was shut-in due to wildfire in Fort McMurray.
An early survey of analysts showed U.S. gasoline stocks posted a build of 500,000 bbl during the week-ended June 17 and distillate stocks up by 1.0 million to 1.5 million bbl, but forecasts for crude stocks were mixed.
Elsewhere, reports said Saudi Arabian crude oil exports fell in April despite high production levels, suggesting overseas demand is not as strong as previously thought.
With WTI prices currently nearly double what they were in mid-February, U.S. oil shale drillers are seeking to raise their oil production, with Bakers Hughes reporting the third straight weekly increase in the number of oil rigs in operation last week.
Technically, the short-term trend remains up for crude and product futures, meaning the market could see renewed push in buying interest, according to DTN senior analyst Darin Newsom.
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