Oil prices rose upwards to 2% on June 23 (Thursday), this coming from the last polling of Brexit polls that raised optimism over Britain remaining in the EU. Global indexes, including commodities, have been on the edge for weeks ahead of Britain’s referendum on European Union membership. The majority of the polling results are expected to come in between 01:00 and 03:00 GMT following a YouGov poll shortly after voting closes at 21:00 GMT. Global benchmark front-month Brent crude was trading up 93 cents at $50.81 a barrel by 10:35 GMT, a major increase this week. It played with an intra-day high of $50.90 a barrel, up $1.02 from Wednesday’s close. While, U.S. futures closed at $49.92, up 79 cents. Hans van Cleef, senior energy economist at ABN Amro, stated: “most market participants have positioned ahead of the Brexit voting or are waiting on the sidelines to see the outcome.”
Some of the final opinion polls published late on Wednesday, hours prior to voting, displayed the “Remain” campaign ahead. This made the sterling skyrocket to a 2016 high against the dollar on Thursday. Meanwhile, Britain’s top share index rose to a two-month high.
Oil inventories dropped by less than expected, defying the investors and analyst projections. The Energy Information Administration (EIA) claimed on Wednesday that stocks fell by 917,000 barrels in the week to June 17, compared with expectations of a 1.7 million barrel drop. If Britain votes to remain in the EU, the oil market is likely to revert towards fundamentals, returning to the supply and demand principles. Bjarne Schieldrop, chief commodities analyst at SEB, commented: “the first emerging signs in April and May that the deep CapEx cuts in upstream oil production have started to hurt oil production … could turn out to be a clearly visible trend”. Moreover, the Nordic bank lifted its 2016 Brent crude oil estimate to $48 a barrel, up from $44 previously (a $4.00 increase), and raised its 2017 price forecast to $55 a barrel from $50 (a $5.00 increase).
“The oil markets were returning to balance, and prices had risen in response to supply and demand closing in on equilibrium,” Saudi Arabia’s energy minister stated.