Oil bulls could end up roadkill following the Brexit ballot, Bloomberg reports.
Britain’s exit from the European Union not only means there’ll be a period of uncertainty over Europe’s future, but it’s casting a shadow over the oil market, which tumbled as much as 6.8% after Friday’s vote.
“A vote for Brexit is a vote against globalization, against the free mobility of people and goods,” says Francisco Blanch, head of commodities research at Bank of America Merrill Lynch in New York. “Any reversal in the growth of trade and mobility is bad for the commodities, except gold.”
Global equities plunged after the decision, while haven assets such as the dollar and gold surged.
UBS AG says traders will soon focus again on the fundamentals of the market as a global crude surplus fades. They’ll also have to weigh any lasting impact from the U.K.’s decision on the world economy and oil demand.
Money managers were bullish in the run-up to the British vote, boosting bets on rising crude prices in the week ended June 21, according to data from the Commodity Futures Trading Commission. West Texas Intermediate tumbled 4.9% on June 24 on the New York Mercantile
Exchange. It was down another 2.71% this morning, to $46.35 a barrel as of 10 a.m.
“We were calling for $44 oil in 2016 on average, now we expect it in the low $40s, roughly $41,” says Michael D. Cohen, an analyst at Barclays in New York. “The 2017 forecast has been reduced by $3, from $60 to $57.”
