Oil gains on weak dollar, easing fears of Brexit

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SINGAPORE: Oil prices extended gains in Asia on Monday thanks to a weaker US dollar and easing fears of Britain’s exit from the European Union.

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The dollar fell for the fourth day in a row on Monday, trading lower against most major currencies, making dollar-priced oil cheaper for those using other currencies.

At about 7:10 a.m. local time, US benchmark West Texas Intermediate for July delivery was up 53 cents, or 1.10 percent at $48.41 a barrel.

International benchmark North Sea Brent for August delivery was up 58 cents, or 1.18 percent, at $49.75 a barrel.

The commodity is recovering after seeing sharp spikes and dips in the past fortnight in a jittery market.

US crude last week plunged nearly 10 percent in six days after hitting 11-month highs the previous week, while European Brent had given up 9 percent.

“The biggest factor this week may well be currency, particularly given the uncertainty around the Brexit vote,” Michael McCarthy, a chief strategist at CMC Markets in Sydney, told Bloomberg News.

“The widely shared view that the market will be balanced by the end of the year is keeping a bit of support in place. Oil above $50 will tempt the highly agile US shale producers back into action, so that should keep a cap on prices,” he said.

Markets had been worried about a potential Brexit when polls showed the Leave camp gaining momentum. The IMF and Bank of England have warned such a move might lead to a recession with a global spillover. But opinion polls over the weekend showed the Remain camp gaining ground just days before the vote, boosting equity markets around the world.

“Judging by the market reaction over the last two days, more volatility is likely this week,” CMC Markets analyst Margaret Yang wrote in a note.

She added: “It is expected that a vote to remain would lead to a quick unwinding of risk premium and a substantial risk-on rally, whereas a Brexit vote would have the opposite effect.”

AFP

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