Oil ends down nearly 5 percent on Brexit worry, supply builds

Tue Jul 5, 2016 5:38pm EDT
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By Barani Krishnan

NEW YORK (Reuters) - Oil prices tumbled nearly 5 percent on Tuesday as investors worried that Britain's exit from the European Union would slow the global economy, making it unlikely energy demand will grow enough to absorb a supply glut.

Brexit worries hit Britain's property market and drove the pound to a 31-year low. A flurry of data from China in coming weeks is likely to show weaker trade and investments.

Traders also cited data from market intelligence firm Genscape showing a build of 230,025 barrels at the Cushing, Oklahoma storage hub for U.S. crude futures, during the week to July 1.

"There are risk-off trades across the board," said David Thompson, executive vice-president at Washington-based commodities broker Powerhouse. "Stocks, commodities, sterling are all off while U.S. bonds and T-bills are soaring."

Brent futures settled down $2.14, or 4.3 percent, at $47.96 a barrel while U.S. crude fell $2.39, or 4.9 percent, to end at $46.60.

Oil prices are up almost 80 percent from 12-year lows of around $27 for Brent and $26 for U.S. crude in the first quarter. The rebound was fueled by supply outages from Canada to Nigeria that created the perception that a two-year-old supply glut may be easing.

Yet, a partial recovery in Nigerian output helped boost OPEC crude production last month, a Reuters survey found.

"The increase in OPEC production threatens to postpone the anticipated rebalancing of the global market," said Tim Evans, energy futures specialist at Citi Futures in New York.   Continued...

Shell logos are seen on fuel pumps at a petrol station in west London, January 29, 2015. REUTERS/Toby Melville