Oil Halts Gain Near $49 Before U.S. Stockpile Data, Brexit Vote

LAGOS, Nigeria, Capital Markets in Africa: Oil halted gains near $49 a barrel as markets awaited weekly U.S. stockpile data, while the U.K. referendum on membership of the European Union remained too close to call.

Futures slid as much as 1 percent in New York. U.S. inventories probably fell by 1.5 million barrels last week, keeping them more than 100 million barrels above the five-year average, according to a Bloomberg survey before government data Wednesday. Separate polls showed leads for either side of the U.K. referendum before the vote on Thursday.

Oil has advanced more than 85 percent from the lowest level in 12 years as disruptions from Nigeria to Canada and falling output in the U.S. trimmed a global surplus. Governments and investors around the world are watching the U.K. referendum amid concern that a so-called Brexit would spark turmoil across global markets. U.S. crude futures gained 6.8 percent in the previous two trading sessions amid growing expectations the country would vote to remain in the EU.

“Oil prices remain largely sentiment-driven,” analysts at Commerzbank AG led by Eugen Weinberg in Frankfurt, said in a report. “Recent days have shown just how quickly public opinion can shift” in the U.K. referendum campaign, and “against this backdrop today’s price losses make sense.”

West Texas Intermediate for July delivery, which expires Tuesday, lost as much as 50 cents to $48.87 a barrel on the New York Mercantile Exchange and traded at $48.96 at 10:53 a.m. London time. Prices rose $1.39 to close at $49.37 a barrel on Monday. Total volume traded was about 48 percent below the 100-day average. The more-active August contract was 36 cents lower at $49.60.

U.S. Stockpiles
Brent for August settlement fell as much as 60 cents, or 1.2 percent, to $50.05 a barrel on the London-based ICE Futures Europe exchange. The contract rose $1.48, or 3 percent, to $50.65 a barrel on Monday. The global benchmark crude traded at a premium of 59 cents to WTI for August.

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U.S. crude inventories dropped for a fourth week to 531.5 million barrels through June 10, according to data from the Energy Information Administration. Drilling activity rose for a third week through Friday, with companies adding nine rigs to boost the total to 337, according to data from Baker Hughes Inc.

Nigeria’s presidency is “not aware” of a ceasefire with militants targeting oil facilities in the Niger Delta region, Femi Adesina, President Muhammadu Buhari’s spokesman, said by phone from capital, Abuja.

Lagos-based newspaper ThisDay reported earlier that the government had agreed to a 30-day truce with militants including the Niger Delta Avengers, allowing Buhari to come up with plans to develop the region’s economy. Nigeria’s production has sunk to the lowest since 1988 as a result of the assaults, according to the International Energy Agency.

Source: Bloomberg Business News