OIL PRICES UP TO $50.65
According to WSJ, oil prices rose for a second session Monday as the dollar weakened and stocks soared on growing expectations that the U.K. is likely to remain in the European Union after this week's referendum.
The U.S. crude benchmark rose 2.9% to settle at $49.37 a barrel on the New York Mercantile Exchange, while the global Brent contract gained 3% to end at $50.65 a barrel on the ICE Futures Europe. Both contracts were rebounding after a six-day losing streak.
Opinion polls published over the weekend suggest the U.K. is more likely to vote to remain in the EU in Thursday's referendum. A poll by Survation published in the Mail on Sunday newspaper showed 45% supported remaining in the EU and 42% favored leaving. A poll of polls, averaging the past six polls in the U.K. vote, has returned to 50/50, while the bookmakers' odds for a British exit from the bloc, or "Brexit," fell sharply from last week.
That prompted the dollar to weaken 0.6% against a basket of currencies in the WSJ Dollar Index—but particularly against the British pound, which rose 2.5% against the dollar Monday. A weaker dollar often boosts oil prices by making it cheaper for traders using non-U.S. currencies.
"The reverse correlation to the dollar index, that's the story of the day," said Robert Yawger, director of the futures division at Mizuho Securities USA.
Oil markets also got a boost from carry-over optimism in global stocks that the U.K. will remain in the European Union. The Stoxx Europe 600 jumped 3.7% Monday after gains in Asian shares, and the Dow Jones Industrial Average was up 1.1% in midafternoon trading.
"Traders are preoccupied with Thursday's British referendum," analysts at oil brokerage PVM said in a note to clients. "We are likely to face volatile trading in the coming four to five days."
Market watchers say that while a Brexit may not have a direct effect on oil, the market could suffer collateral damage. The ensuing turmoil could worsen sentiment for riskier assets such as commodities. Oil could also take a hit from a rising dollar, which analysts expect to strengthen if the U.K. votes to leave the EU
"If there is a Brexit, the negative pressure on oil prices would be driven by risk aversion, not fundamentals," said Michael Wittner, chief oil analyst at Société Générale. Oil prices might fall by up to 5% if the U.K. votes to leave the bloc, but those declines would be temporary, Mr. Wittner said.
The bullish outlook on the referendum's outcome over the weekend has helped crude prices to defy negative factors, such as the resumption of oil production in Canada after wildfires and a further increase in the number of active rigs in the U.S.
"Investors shrugged off another rise in the U.S. rig count, instead buoyed by continued signs that current prices are still unlikely to incentivize U.S. producers to increase production," said ANZ Research.
In refined product markets, gasoline futures ended at 5.1% higher at $1.5827 a gallon, and diesel futures rose 3.1% to $1.5274 a gallon.
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