Oil takes Brexit hit
The UK vote to leave the European Union had the markets in a whirlwind at the end of the week and the oil market fell rapidly on confirmation of the results. In early trading on Friday, the market saw some recovery with Brent crude priced below US$49 with WTI holding above US$48 a barrel
As do stocks
The stock markets around Europe took an instant hit, with billions of dollars being lost in morning trading following the surprising decision.
The British pound had its steepest fall, down 10% at one point, but the Bank of England governor, Mark Carney assured the markets that he was ready to make any monetary adjustments necessary.
Jonathan Lyons, chief European economist from Capital Economics said: “The outcome clearly creates considerable short-term uncertainty, which is likely to weigh on the UK economy in the coming quarters and business confidence will presumably drop sharply for a while.”
Fall out yet to be seen
Depending on who you talk to, the fall out of the UK vote is yet to be seen.
The Austrian Finance minister Hans Joerg Schelling spoke to Bloomberg on Friday and said he did not see Britain’s departure as a necessary bad thing.
He said it “damages the United Kingdom” more than the European Union but he says the early market and currency reaction was “overshooting and over reacting” and it will rebalance shortly.
Jason Schenker, president of Prestige Economics in the US says, “This successful Brexit vote is likely to be disastrous for global and European economies, but much worse for the UK economy.
“We see downside risks to Eurozone and UK growth as a result of the Brexit, at a time when US growth has decelerated and Chinese manufacturing remains in recession.”
Schenker still holds the position that the US economy is heading into recession by the end of the year.
BP boss still upbeat
The CEO of BP, Bob Dudley was speaking at the Economic Club of Washington this week and he was in optimistic mood about the future of the oil market.
He said he believed that “global supply and demand recently have moved towards a better balance,” as he looks towards a sense of stability of oil at US$50 by the end of 2016.
Saudi stocks down
Oil inventories in Saudi Arabia are down this month according to the Joint Organisations Data Initiative from the International Energy Forum.
Many analysts say the rebalancing of stock levels is significant and the energy minister Khalid Al-Falih has been talking about the rebalancing of supply and demand on the global market and reiterated his position in an interview with the Houston Chronicle this week.
He added caution saying the market needs “to wait for the second half of the year and next year to see what works out.”
Euro repercussions overshadow better fundamentals
In the short-term, the market will continue to focus on the repercussions of the UK departure from the EU.
Investors and traders will be looking for a more optimistic outcome as the fundamentals of the oil market look stronger and more balanced than in previous months.