Oil rises as investors
focus on Britain's EU referendum
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[June 23, 2016]
By Karolin Schaps
LONDON (Reuters) - Oil prices rose by
up to 2 percent on Thursday, shrugging off a smaller than expected
draw on U.S. crude stocks as money and equity markets firmed after
the last sweep of Brexit opinion polls raised optimism over Britain
remaining in the EU.
Global markets, including commodities, have been on tenterhooks for
weeks ahead of Britain's referendum on European Union membership on
Thursday. The majority of results are expected to come in between
0100 and 0300 GMT following a YouGov poll shortly after voting
closes at 2100 GMT.
Global benchmark front-month Brent crude <LCOc1> was trading up 93
cents at $50.81 a barrel by 1035 GMT. It touched an intra-day high
of $50.90 a barrel, up $1.02 from Wednesday's close.
U.S. futures stood at $49.92, up 79 cents.
"Most market participants are positioned ahead of the Brexit voting
or are waiting on the sidelines to see the final outcome," said Hans
van Cleef, senior energy economist at ABN Amro.
Some of the last opinion polls published late on Wednesday, hours
before voting started, showed the "Remain" campaign ahead.
This propelled sterling to a 2016 high against the dollar on
Thursday while Britain's top share index rose to a two-month high.
Oil defied bearish news that U.S. weekly crude inventories dropped
by less than expected. The Energy Information Administration said on
Wednesday that stocks fell by 917,000 barrels in the week to June
17, compared with expectations of a 1.7 million barrel decrease.
If Britain votes to remain in the EU, the oil market is likely to
switch its focus to fundamentals, returning its attention to the
supply and demand picture.
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A worker walks past oil pipes at a refinery in Wuhan, Hubei province
March 23, 2012. REUTERS/Stringer/File Photo
"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," said Bjarne Schieldrop, chief commodities analyst at SEB.
The Nordic bank lifted its 2016 Brent crude oil estimate to $48 a barrel, up
from $44 previously, and raised its 2017 price forecast to $55 a barrel from
Saudi Arabia's energy minister told state-owned television that the oil market
was returning to balance and prices had risen in response to supply and demand
edging closer to equilibrium.
(Additional reporting by Aaron Sheldrick in Tokyo; Editing by David Goodman)
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