Oil Extends Gain From One-Month Low as Stocks Rise, Dollar Slips

Brexit Positivity Fuels Oil's Gains From One-Month Low
  • Poll shows the campaign for the U.K. to stay in the EU leading
  • Gasoline surges as refiner profit from making fuel increases

Oil gained, extending its advance from a one-month low last week, as equities rose and the dollar slipped on speculation the U.K. will vote to remain in the European Union.

Futures rose 2.9 percent in New York. The Bloomberg Dollar Spot Index fell for a fourth day and global equities surged as a poll showed the campaign for the U.K. to stay in the EU leading by three percentage points. Oil prices closed at a one-month low on Thursday as speculation the U.K. would leave the EU intensified and central banks signaled their worries about global growth. Gasoline futures climbed the most in a month.

"The market is being moved by the vagaries of the upcoming vote and the emotions around it," said John Kilduff, partner at Again Capital LLC, a New York hedge fund focused on energy. "Prices are going to move up and down through the end of this week on Brexit headlines."

Crude has advanced more than 80 percent from the lowest level in 12 years as disruptions from Nigeria to Canada and falling output in the U.S. trim a global glut.

For a story on whether the oil market will achieve balance or be in deficit, click here.

West Texas Intermediate for July delivery, which expires Tuesday, rose $1.39 to settle at $49.37 a barrel on the New York Mercantile Exchange. Total volume traded was 31 percent below the 100-day average. The more-active August contract climbed $1.40 to $49.96 a barrel.

U.K. Referendum

Brent for August settlement climbed $1.48, or 3 percent, to end the session at $50.65 a barrel on the London-based ICE Futures Europe exchange. The global benchmark crude was at a 69-cent premium to August WTI.

The referendum on June 23 is being watched by governments and investors around the world amid worries that a so-called Brexit would spark a wave of turmoil across global markets. The S&P 500 Index jumped the most in about a month and the Stoxx Europe 600 Index had its biggest gain since August after bookmakers’ odds suggested the chances of a “Leave” vote faded since the murder of a pro-European lawmaker on Thursday.

"The financial markets don’t think the British will leave," said Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital in Miami. "A vote to leave Europe would probably lead to a global recession, which would lead to the next major leg down for the oil market."

U.S. Stockpiles

U.S. crude inventories probably dropped by 1.5 million barrels last week, according to the median of estimates in a Bloomberg survey before an Energy Information Administration report on Wednesday. Stockpiles slipped for a fourth week to 531.5 million barrels in the seven days ended June 10 yet remain about 33 percent above the five-year seasonal average, EIA data show.

"Once the Brexit vote is past we will move back to moving on the real issues in the oil market: supply and demand," Corcelli said.

U.S. gasoline inventories probably declined 1.15 million barrels last week, according to the Bloomberg survey. Demand, which typically peaks between the Memorial Day holiday in late May and Labor Day in early September, has been running at a record pace this year, according to the American Petroleum Institute.

July gasoline futures rose 5.1 percent to settle at $1.5827 a gallon. The crack spread, a measure of refinery profit margins from processing crude into the fuel, jumped 12 percent to $17.10 a barrel, according to data compiled by Bloomberg.

Oil-market news:

  • U.S. companies increased the rate of drilling for a third week, adding nine rigs to bolster the total number of machines to 337, according to data from Baker Hughes Inc. on Friday.
  • Money managers reduced bets on rising WTI prices by the most in 11 months in the week to June 14 as Canadian output ramps up after Alberta’s wildfires, Commodity Futures Trading Commission data show.
  • Russian President Vladimir Putin is considering selling part of oil producer Rosneft OJSC to China and India as he tries to meet spending commitments before a possible re-election bid in less than two years.
  • BP Plc can keep spending at a reduced rate of about $17 billion for another three years without affecting growth, Chief Executive Officer Bob Dudley said in a Bloomberg television interview Friday.
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