NEW YORK/LONDON Oil prices fell for a fourth straight day on Tuesday, swept lower by investor nervousness over Britain’s vote next week on whether to leave the European Union, which overshadowed signs of a return to health for crude markets.
Safe-haven German Bund yields DE10YT=RR fell below zero for the first time, while industrial commodities and equity markets, seen as more vulnerable to economic risk, dropped after polls showed Britain’s “Leave” campaign leading ahead of the June 23 vote on EU membership.
The referendum-related concerns eclipsed an 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] On Monday, OPEC forecast that the world oil market would be more balanced in the second half of 2016 as outages in Nigeria and Canada help to speed erosion of a supply glut.
Brent crude oil futures LCOc1 fell 50 cents to $49.85 a barrel by 10:02 a.m. EDT (1402 GMT), while U.S. crude futures CLc1 lost 40 cents to $48.48 a barrel.
“Even as both OPEC and the International Energy Agency talk about a tighter oil market, fear of the fallout from a UK exit from the euro zone is throwing global markets into a tizzy,” said Phil Flynn, an analyst at Price Futures Group in Chicago.
The campaign for Britain to leave the EU has a “significant lead” ahead of the referendum, according to a poll from TNS.
“This (the referendum) has rattled a lot of financial and commodity trader/investors with money seemingly starting to flow to the so-called safe-haven U.S. dollar until the dust settles and the voting is concluded,” said Dominick Chirichella, senior partner at the Energy Management Institute in New York.
“The strong U.S. dollar versus most currency pairs is a negative price directional driver for the oil complex.”
If Britain voted to leave the EU, a prospect dubbed “Brexit”, investors fear the bloc could slip into recession, which in turn could undermine oil demand.
The dollar .DXY has risen about 1.5 percent from its June lows against a basket of currencies, spurred by Brexit fears.
Reflecting this extreme nervousness, volatility in the pound GBP1MO spiked to its highest level 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 economic 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.
(Additional reporting by Henning Gloystein in SINGAPORE and Aaron Sheldrick in TOKYO- Editing by Louise Heavens and Paul Simao)
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