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Oil prices up as global markets recover post Brexit
[SINGAPORE] Oil prices rose in Asia on Friday as traders welcomed assurances from central bank around the world that they were ready to step in to prevent a global rout following Britain's vote to leave the European Union.
After the initial shock of last Thursday's referendum sparked a freefall, this week has seen a broad recovery across all asset classes.
South Korea has promised of US$17 billion in stimulus and speculation swirls that Japan is planning to further loosen monetary policy while the chances of the US raising interest rates have all but evaporated.
On Thursday, Bank of England boss Mark Carney hinted that policymakers were contemplating a cut in interest rates.
The news sent European and US shares soaring, and Asian traders picked up the baton Friday to press more gains.
The optimism filtered through to the oil market and at about 0315 GMT, US benchmark West Texas Intermediate for August delivery was up 34 cents, or 0.70 per cent, at US$48.67.
Brent for September, a new contract, was up 39 cents, or 0.78 per cent, at US$50.10.
"Investors seemed to be finding reasons to be optimistic about the post-Brexit rebound," said IG Markets analyst Bernard Aw.
CMC Markets analyst Margaret Yang said equity markets were on the rise partly because "the Bank of England hinted that more monetary stimulus is on the roadmap to battle the post-Brexit economic fallout".
Oil market watchers said last week's decline in US commercial inventories is also helping boost prices, but a sustained price rise will only come if producers make meaningful cuts in output.
The drop in US crude stockpiles "is certainly supportive" of prices, David Lennox, a resource analyst at Fat Prophets in Sydney, told Bloomberg News.
"But the market is waiting for real production cuts, and until that happens any strong rally in the oil price is just not going to be sustainable," he said.