Oil Opens Higher on Brit Poll
NEW YORK (DTN) -- New York Mercantile Exchange oil futures reversed higher early Thursday as part of a broader market rally after a fresh opinion poll in Britain showed a tilt toward the country remaining a member of the European Union.
British citizens are casting ballots in a referendum today on their EU membership, a once in a generation decision that would determine the country's future economic prosperity and the course of the region.
Final results are due on Friday morning and a great deal of uncertainty remains, but the latest polls show the campaign to remain in the EU ahead by four points. As a result, the sterling pound rose to a year-to-date high while the dollar fell to a seven-week low, with a weaker greenback boosting oil prices.
Separately, economic data released today were mixed, with U.S. initial jobless claims, a proxy for job layoffs, falling more than expected, while European manufacturing growth slowed.
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At 9:00 AM ET, NYMEX August West Texas Intermediate crude oil futures were up 82cts at $49.95 bbl while August Brent crude futures contract on the IntercontinentalExchange gained 90cts to $50.78 bbl.
In products trade, NYMEX July ULSD futures climbed 1.99cts to $1.5247 gallon at the open, and July RBOB futures gained 2.12cts to $1.6094 gallon.
On Wall Street, equities nudged up nearly 1% on risk-on trade, with U.S. markets tracking European and Asian bourses that rallied to two-week highs. FTSE, U.K.'s main stock index, was up for the fifth straight day, and bond yields in the United States and Europe rose as well.
Oil futures shrugged off a smaller-than-expected draw on U.S. crude oil inventories for the week-ended June 17 reported Wednesday, as markets firmed on the last set of opinion polls showing British voters likely to decide to remain part of the regional bloc, although some analysts see the reaction in the press as overdone versus a stay or nay vote.
The EIA's weekly oil report was bearish, showing builds for products inventories and a smaller-than expected decline in domestic crude oil supply during the week-ended June 17. EIA reported crude oil inventories fell 917,000 bbl, below expectations for a 1.7 million bbl stock draw, while the American Petroleum Institute reported a 5.2 million bbl plunge.
Domestic crude production fell 39,000 bpd to 8.677 million bpd last week, the lowest since September 2014, and down 927,000 bpd year-over-year, EIA data showed. The federal data also showed gasoline inventories increased 623,000 bbl versus an expected 300,000 bbl draw, and distillate stocks rose 151,000 bbl versus forecasts for a 200,000 bbl stock build.
On the demand side of the ledger, EIA data showed modest gains in demand for gasoline, distillates and crude oil for the week ended June 17. Demand is seen improving during the U.S. summer peak driving season, with the EIA reporting a record high weekly rate of 9.815 million bpd.
The International Energy Agency last week forecast that global supply and demand should come into balance in the second half of 2016 rather than in early 2017 as previously thought.
Federal Reserve Chair Janet Yellen ended her testimony on Wednesday before Congress, with little indication about the Fed's view of the U.S. economy and the timing of potential interest rate hikes. Yellen said Tuesday a Brexit was a risk to the economy, and she would tread carefully as she gauges with other bank officials on when to lift interest rates.
George Orwel can be reached at george.orwel@dtn.com
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