Oil prices slid more than 4 percent on Tuesday as investors worried that Britain's exit from the European Union would slow the global economy, and as data showed a build in stockpiles at the delivery point for US crude futures. Brexit worries hit Britain's property market and drove the pound to a 31-year low. A flurry of data from China in the coming weeks is expected to show weakness in trade and investment.
Traders said oil prices were also pressured by data from market intelligence firm Genscape showing a build of 230,025 barrels at the Cushing, Oklahoma storage hub for US crude futures, during the week to July 1. Brent crude was down $2.22, or 4.3 percent, at $47.88 a barrel by 11:08 am EDT (1508 GMT). US crude fell $2.20, or 4.5 percent, to $46.79.
"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 US bond and T-bills are soaring." Oil prices are up almost 80 percent from 12-year lows of around $27 for Brent and $26 for US crude. The rebound was fuelled 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 last week.
Several tankers carrying gasoline-making components have, meanwhile, dropped anchor off New York harbour, unable to discharge as onshore tanks were full. In Libya, where oil output has slowed to a trickle due to conflict, the National Oil Corp has agreed to merge with its domestic rival, raising hopes the Opec member could start to pump more. A Reuters review of disclosures by the largest 30 US shale firms showed 17 of them increased their hedge books in the first quarter, the most at least since early 2015. Several, including EOG Resources Inc and Devon Energy Corp, two of the biggest shale companies, secured significant protection of future earnings for the first time in at least six months. "You have to remember that sentiment in this market is still so fragile," said Michael Tran, director of commodity strategy at RBC Capital Markets in New York. "Producers ended up locking in something in case we did a double dip."