Oil prices slipped again on Monday, extending last week’s losses and mirroring a sell-off across Asian markets fuelled by worries about the global economy, Britain’s future in the EU and producers bringing more rigs back online.
The retreat comes after US benchmark West Texas Intermediate last week hit an 11-month high thanks to a weaker dollar, which makes the commodity cheaper for anyone using other currencies.
Dealers are cautiously awaiting meetings of the US Federal Reserve and Bank of Japan this week hoping they will at least provide some guidance on monetary policy.
There is also increasing nervousness that Britain will vote to leave the European Union, with some opinion polls saying the “leave” camp in front just over a week before the June 23 referendum.
There are worries that such a decision could lead to a fresh wave of turmoil across global markets.
“This week as well as the next will likely see increased volatility in the markets. The tide surrounding the Brexit sentiment will quickly shift as headline polls drive trading,” Bernard Aw, a strategist for IG Markets wrote in a note.
“While there are no expectations for action from the Federal Reserve and the Bank of Japan, their post-decision comments will still matter. In particular, the Fed’s economic projections will be scrutinised,” he added.
At about 0850 IST, WTI was down 60 cents, or 1.22 per cent, to trade at USD 48.47 a barrel while Brent fell 47 cents, or 0.93 per cent, to USD 50.07. BMI Research analyst Peter Lee told AFP companies were restarting rigs as prices had risen above the USD 50 mark that makes its financially viable to pump crude again.
On Friday, data showed the number of active US rigs rose for the second week in a row, by three to 328, according to oilfield services firm Baker Hughes. However, that is still far below the 635 pumping a year ago.
“While the big events worldwide like the central bank meetings and (Britain’s EU) vote will have an impact on the market, fundamentally, the picture still remains the same. It is all due to demand and supply,” he added.
There was little movement after China released data that suggested the world’s number two economy was stabilising after months of slowing growth.