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Oil Market Knees Buckling on News of Brexit

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Markets were relatively shocked this morning to find out that Great Britain voted to leave the European Union. This lead to the predicted announcement by Prime Minister David Cameron the he will resign his post, effective later this year. The late prediction polls had the “Bremain” camp slightly ahead, and many thought the status-quo basis would keep their status the same.



As a result of the vote, many markets are significantly weaker, as we wait to see some clarity on how this will affect the future. Also, investments have fled other currencies, and poured into the U.S. dollar. This morning, the U.S. dollar reached its highest level since mid-March, and has made dollar based goods more expensive for holders of foreign currency. This has weighed on the energy complex so far today and pushed it lower. Further, many now look to potential fear over future crude oil and refined products demand out of the region, should the result temper economic growth.



Another question the market will consider: How will this successful vote to exit influence other countries in the EU that may also have thoughts about leaving?



Yesterday’s energy market trading was fairly free of large price moves. After a week a volatile moves, many were likely taking a breather in preparation for today. Early morning saw August WTI futures oscillate on either side of the prior day’s settle. However, these fluctuations were muted, and hung around unchanged on the day. Later in the afternoon, as U.S. equities were reaching their highs on the day, energy futures were pulled a little higher.



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