NEW YORK- Swept up in a global markets selloff on concerns about economic growth, oil prices tumbled Friday as investors snared profits from a recent rally, AFP reports. Risk aversion dominated ahead of the Federal Reserve’s US interest rate decision next Wednesday and Britain’s vote on leaving the European Union the following week.
“We definitively have seen concerns about the global economic outlook… generally speaking there’s a kind of flight to quality,” said Phil Flynn of Price Futures Group. “You have people buying gold, selling the stock market and selling oil because of the concerns.”
US benchmark West Texas Intermediate for July delivery dropped $1.49 to $49.07 on the New York Mercantile Exchange, ending below $50 for the first time since Monday. In London, Brent North Sea crude for delivery in August, the European benchmark, fell $1.41 to $50.54 a barrel.
Looming over the markets was Britain’s June 23 referendum that could lead to the country splitting from the 28-nation EU. The potential Brexit raises concerns it would hurt European economic growth, pushing investors to cut risk exposure, said Tim Evans of Citi Futures. “The oil market is seeing its own flow of related selling, with traders inclined to cash profits off recent gains ahead of the weekend,” Evans said.
Earlier in the week, WTI reached its highest level in nearly a year supported by production outages in Nigeria caused by militant attacks, and, more broadly, by the notion that the global oversupply was easing. “We still have a lot of oil on the market,” said Gene McGillian of Tradition Energy McGillian said.
“You can’t completely ignore the fact we still have near-record inventories in the US and around the world… even though there are signs of falling production in the US and unplanned supply disruptions in countries like Nigeria and Libya.”
With prices nearly doubling from February lows, there were indications that US production was beginning to stabilize. Official data showed Wednesday the first weekly output increase in three months. On Friday, the number of active US oil rigs rose for the second week in a row, according to oilfield services firm Baker Hughes. The count rose by three last week to 328, still far below 635 a year ago.