Global oil benchmark, Brent crude, traded sharply lower on Monday, extending its declines following Britain’s vote to exit the European Union on Thursday.
The dip in the oil price comes as investors were worried about global energy demand and shunned assets perceived as risky in the aftermath of the Brexit decision.
Brent, against which Nigeria’s oil is priced, had hit the $50 per barrel mark for the first time in 2016 on May 26 and was as high as $53 per barrel few days after before dropping to $49 on June 13.
It stood at $46.31 as of 8.05pm on Monday, weighed by a rallying dollar and continued market uncertainty over Brexit.
Brent and US crude futures have lost about seven per cent since Thursday’s settlement after the so-called Brexit vote sent global risk assets plummeting on Friday as investors fled to safe havens such as the dollar, United States Treasuries and gold, according to Reuters.
Analysts at Goldman Sachs and other research houses sought to allay fears over the impact of the EU crisis on oil specifically, pointing out that Britain’s demand for fuel was negligible at the global level.
Oil prices rose slightly early on Monday on some of that sentiment, before slipping again. Market intelligence firm, Genscape’s report of a draw of more than 1.3 million barrels at the Cushing, Oklahoma, delivery point for US crude futures provided little support.
The dollar was up almost one per cent, near Friday’s three-month high, making oil and other commodities priced in the greenback less attractive to holders of the euro and other currencies.
“We feel that a market shock such as Brexit can often induce enough chart damage to force a major long liquidation phase,” Jim Ritterbusch of Chicago-based oil market consultancy, Ritterbusch & Associates, was quoted to have said.