Vote leave supporters stand outside Downing Street after Britain voted to leave the EU. REUTERS/Kevin Coombs |
LONDON (Reuters) - Oil prices
slumped by more than 6 percent on Friday after Britain voted to leave
the European Union, raising fears of a broader economic slowdown that
could reduce demand.
Financial
markets have been worried for months about what Brexit, or a British
exit from the European Union, would mean for Europe's future, but were
clearly not fully factoring in the risk of a leave vote.
British Prime Minister David Cameron, who campaigned to remain in the EU, said he would stand down by October.
Brent crude (LCOc1) was down $2.45 at $48.46 a barrel at 1004 GMT. U.S. crude (CLc1) was down $2.39 at $47.72 a barrel.
Earlier
in the day, both contracts were down by more than $3, or over 6
percent, the biggest intra-day declines for both since April 18, when a
meeting of top global oil producers failed to agree on an output freeze.
Sterling
(GBP=) sank 10 percent in value to its weakest since the mid-1980s. The
FTSE 100 (.FTSE) fell more than 8 percent at the open, with banks among
the hardest hit.
"The global uncertainly that (the
vote) is likely to unleash is likely to have a potentially negative
effect on GDP growth, not only in the UK, but potentially in Europe,"
said Michael Hewson, chief market analyst CMC markets.
"Obviously
we don't know that yet, but certainly in the context of where we were
24 hours ago, the knee-jerk reaction is to sell on the reality," he
added.
Some analysts said oil could face further downward pressure.
"Our
view is that we have not yet seen the low oil price of the day with
Brent likely to trade down towards $45 or lower before we have seen the
worst of it," Bjarne Schieldrop, chief commodity analyst at SEB, said in
note to clients.
Oil major BP (BP.L) said on Friday its headquarters would remain in the United Kingdom, despite the vote.
"It
is far too early to understand the detailed implications of this
decision and uncertainty is never helpful for a business such as ours,"
BP said.
The vote to break with Europe is set to usher in deep uncertainty over trade and investments.
"Any
further downturn in the economy or volatility in the oil price could
cause further distress in the sector and in particular further
project....deferrals might have significant consequence for the service
sector who also rely on mobility of employees around the world," PwC UK
and EMEA oil and gas leader Alison Baker said.
http://finance.yahoo.com/news/oil-falls-early-returns-show-001549954.html
http://finance.yahoo.com/news/oil-falls-early-returns-show-001549954.html
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