Oil rebounds on easing Brexit fears, weaker dollar

File photo of a motorist filling petrol at a service station. (Photo: AFP/Amer Hilabi)

NEW YORK: Oil prices rebounded on Friday (Jun 17) from six straight sessions in the red, benefitting from easing fears of a potential decision by Britain next week to exit the European Union.

The market was also buoyed by a softer greenback, which makes dollar-denominated crude oil cheaper for buyers using other currencies.

"The risk-off trade flow of a day ago has become risk-on, at least for now," said Tim Evans at Citi Futures as European stock markets rallied in a switch to betting that Britain will vote next Thursday to remain in the EU.

US benchmark West Texas Intermediate (WTI) for July delivery leaped US$1.77 to US$47.98 a barrel on the New York Mercantile Exchange.

In London, Brent North Sea crude for delivery in August, the global benchmark, advanced US$1.98 to US$49.17 a barrel.

But over a week of bumpy trade in markets rattled by fears of a pro-Brexit decision in the Jun 23 referendum, the price of WTI lost 2.2 per cent and Brent fell 2.7 per cent.

"We think crude oil will have trouble sustaining today's rally and remains at risk for a deeper correction to the downside," Evans said.

Gene McGillian of Tradition Energy pointed out that prices appeared to be trading in a narrow range. "Overall the market rally seems to have lost momentum," McGillian said.

He cited the return of Canadian production to the market after massive wildfires and the possibility of talks between militant Nigerian groups and the government that could end attacks on oil infrastructure.

Those supply disruptions had helped push prices above US$50.

"The market is still off the 12-year lows that we saw earlier this year and that's predicated on the fact that we're going to see a decline of the North American production level and increase of global demand," McGillian said.

In that context, the market seemed to shrug off this week's rise in active US oil rigs, the third in a row reported by driller Baker Hughes on Friday.

"I'm a little reluctant to say it's a sign that we've reached the threshold where North American drillers are reentering the market," McGillian said.