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Oil falls as Brexit
threat rattles markets
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 [June 14, 2016]
By Amanda Cooper
LONDON (Reuters) - Oil fell on Tuesday,
as investor nervousness over next week's vote on Britain's possible
European Union exit swept financial markets, eclipsing signs of a
return to health for crude prices.
Perceived safe-haven assets such as the Swiss franc and German Bunds
rallied, while industrial commodities and equity markets, seen as
more vulnerable to economic risk, fell after polls showed Britain's
"Leave" campaign leading before a referendum on EU membership..
This overshadowed a more upbeat forecast for oil demand growth from
the International Energy Agency, which said the oil market is
essentially balanced after two years of surpluses. [IEA/M]
Brent crude oil futures fell by 66 cents to $49.69 a barrel by
1039 GMT, dropping for a fourth day in a row, while U.S. crude
futures dropped 65 cents to $48.23 a barrel.
"Basically, safe havens are back in fashion," PVM Oil Associates
analyst Tamas Varga said.
"The thought process is that if the UK leaves the EU, then the EU
might slip back into recession and ... that might negatively impact
oil demand," he said.
Britain's "Out" campaign has increased its lead over the "In" camp
before the June 23 referendum, according to two opinion polls
published by ICM on Monday.
"The risk-off mood that has been pervasive in the markets in the
last few days has taken hold of oil prices, with weakness in Asian
markets and a strong dollar contributing to Brent crude dripping
back below $50," said Mihir Kapadia, CEO at Sun Global Investments,
which has assets under management totalling $500 million.
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Reflecting the extreme nervousness among investors over the prospect of a vote
to leave the EU, dubbed "Brexit", volatility in the pound <GBP1MO> spiked to its
highest in at least 20 years, rising even beyond the heights seen when U.S.
investment bank Lehman Brothers collapsed in late 2008.
Concerns about Chinese growth are also weighing on sentiment, enough to set
aside bullish signs such as a U.S. government forecast on Monday that shale oil
output is expected to fall in July for the seventh consecutive month.
OPEC forecast on Monday that the world oil market would be more balanced in the
second half of 2016 as outages in Nigeria and Canada help to speed the erosion
of a supply glut.
(Additional reporting by Henning Gloystein in SINGAPORE and Aaron Sheldrick in
TOKYO; Editing by Dale Hudson and Louise Heavens)
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