WTI and Brent crude oil prices down 4.1% and 3.9%, respectively, today

Oil prices continued to fall for a sixth consecutive day, today, while concerns over the possible exit of U.K. from the European Union pulled markets down.

Concerns over the future of the E.U. and its currency, along with more bullish statements from the U.S. Federal reserve, strengthened the dollar against the European currency, pushing down the price of oil.

The dollar was up 0.2% at $1.12 against the euro today, as the possible Brexit triggered economic slowdown on the continent and beyond, reports CNBC.

“It is mainly risk aversion ahead of the Brexit vote next week so we see some profit-taking on recent long positions ahead of this event,” said Hans van Cleef, senior energy economist at ABN Amro.

A growing number of U.K. citizens wish to leave the E.U., believing it will give them greater self-determination, and that money spent on E.U. programs would be better spent inside the U.K.

The dollar is also being supported by hints from the Fed Wednesday that there may be two U.S. rate increases this year despite slower-than-expected growth. A stronger dollar makes oil and other commodities priced in the currency more expensive to holders of euros and other currencies.

“With investor positions already at a record high since the beginning of the year, they might want to reduce some of the risks,” said Abhishek Deshpande, lead oil analyst at Natixis.

Concern that U.S. oil production may not be slowing down fast enough undercuts oil price

Adding to the downward pressure on oil prices from next week’s Brexit vote in the UK, investors are also assessing whether U.S. oil production is beginning to rise again following the recovery of prices from $26.55 per barrel in January. Persistent low oil prices forced many producers to shut-in production, but the doubling of the value of oil since the beginning of the year may be prompting some producers to turn back on the taps.

Domestic crude oil stocks fell 933 MBO this Wednesday, according to information from the EIA, less than half of the 2.3 MMBO stack draw economists were anticipating. Stockpiles at Cushing, Oklahoma grew by 900 MBOPD, reports The Wall Street Journal. CNBC reported numbers from market intelligence firm Genscape that indicated a draw from Cushing of 76 MBO.

Production fell 29 MBOPD to 8.7 MMBOPD after rising the week before, according to the EIA.

 


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