Oil price rises 2 percent on post-Brexit bargain hunting

Oil prices rose 2 percent on Tuesday as investors took advantage of a two-day slide in crude triggered by Britain’s vote to leave the European Union and as their focus returned to potential supply outages and drawdowns in crude.

A looming strike at several Norwegian oil and gas fields that threatened to cut output in western Europe’s biggest producer helped support crude futures.
Investors were also counting on a sizeable and a sixth weekly drop in US. crude stockpiles, with oil market analysts polled by Reuters forecasting a 2.4 million-barrel drawdown.
Trade group The American Petroleum Institute was scheduled to issue a preliminary report on crude inventories, ahead of official stockpiles data from the US government on Wednesday.
“Oil is recovering on some bargain hunting after the drop below $47 a barrel proved unsustainable and (on) news of a possible strike in Norwegian oil and gas industry,” said Commerzbank analyst Carsten Fritsch.
Brent crude futures were up 2.1 percent, or $1, at $48.16 per barrel by 1424 GMT. US crude rose 2.3 percent, or 1.10, to $47.43.
The two benchmarks had lost about 8 percent in the past two sessions, with Brent hitting seven-week lows under $47 and US crude a one-month trough below $46.
Tuesday’s recovery came as the dollar retreated from three-month highs, making greenback-denominated crude more attractive to holders of the euro and other currencies. Risk appetite also rebounded across financial markets on reduced fears of contagion from last week’s so-called Brexit.
Some analysts were wary, saying more evidence of fundamental strength was needed to assure the market was on the path to a sustainable rally.
Data showed oil production out of Nigeria, the focus on much supply outages over the past few months due to rebel attacks on oil infrastructure there, was back up at around 1.9 million barrels per day from an early June low of 1.6 million bpd.
“So far, I would categorize today’s current move higher as a corrective move after the strong push lower since last Thursday,” Dominick Chirichella, senior partner at the Energy Management Institute in New York, said, pinning a neutral to slightly bearish view on crude prices.
“More time is needed to safely say the down move in oil is officially over.”

Source: Arab News