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UPDATE 8-Brent crude tumbles to 7-week low on dollar rally, Brexit turmoil

Published 28/06/2016, 05:59 am
© Reuters.  UPDATE 8-Brent crude tumbles to 7-week low on dollar rally, Brexit turmoil
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* Crude futures down almost 8 pct since Thursday's close

* Biggest two-day loss since early February

* Goldman, some analysts don't see Brexit impact on oil for long

* Morgan Stanley (NYSE:MS) more worried about glut in refined products (Adds hedge funds adding to long positions before last week's crash, paragraph 9)

By Barani Krishnan

NEW YORK, June 27 (Reuters) - Crude prices tumbled nearly 3 percent on Monday, with Brent hitting seven-week lows, as a rallying dollar and market uncertainty over Britain's shocking vote to exit the European Union threatened to sap more strength from oil's rebound this year.

Brent and U.S. crude have lost almost 8 percent since Thursday's settlement - the biggest two-day drop in nearly five months - after the so-called Brexit vote sent global risk assets plummeting and safe havens such as the dollar, U.S. Treasuries and gold rallying. MKTS/GLOB LCOc1 settled down $1.25, or 2.6 percent, at $47.16 a barrel. It fell to a seven-week low of $46.69 during the session.

U.S. crude CLc1 fell $1.31, or 2.8 percent, to settle at $46.33. The intraday low of $45.83 matched a one-month trough hit on June 17.

Market intelligence firm Genscape's report of a draw of more than 1.3 million barrels at the Cushing, Oklahoma, delivery point for U.S. crude futures provided little support to prices.

Despite sharp intermittent tumbles, oil has maintained a broadly upward momentum to post monthly gains since February. Earlier, a global supply glut had nearly halved crude prices since mid-2014.

"From a chart standpoint, I think that there may be some shorter-term longs that need to liquidate, and I would think with global volatility continuing to rally, their propensity to liquidate is higher," said Scott Shelton, energy broker with ICAP (LON:IAP) in Durham, North Carolina.

"The issue that may suggest that the majority of the longs won't liquidate is that they are very strong longs as most of it was accumulated below or around the $40 level in WTI. While fundamentals according to the banks are still strong, there are signs that the market's perception of the fundamentals may be changing."

Hedge funds betting on summer gasoline demand raised their bullish bets on U.S. crude futures just before the market's crash on Friday, trade data showed. at Goldman Sachs (NYSE:GS) and a few other research houses sought to allay fears over the impact of the Brexit crisis on oil specifically.

Goldman said even if U.K. economic growth suffered a 2 percent drop, Britain's oil demand would likely be reduced by only 1 percent or 0.016 percent of global demand.

"This is extremely small on any measure," it said.

The British pound GBP= hit 31-year lows and the dollar .DXY a 3-1/2 month high. The greenback's rally made oil and other dollar-denominated commodities less attractive to holders of other currencies. FRX/

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ CHART-China's diesel & gasoline exports are soaring

http://tmsnrt.rs/28KBh02 COLUMN-How long Brexit uncertainty reigns is key for commodities, gold

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