As you’ve probably noticed, oil has slowly started to make a comeback from it’s 13 year lows in the first quarter of 2016. Since January, Brent and US crude have risen almost 80% to their current price of around $48 per barrel. These higher prices are a welcome sight for many in Houston’s “energy corridor”, and many analysts are expecting prices to rise even higher as we move towards the latter half of the year.
Brexit and the EU Referendum
On June 23rd, a vote was held to whether to decide if the UK would remain or leave the European Union. Leading up to the vote, the markets surged as investors bet on a no-vote. However, UK voters decided to exit the European Union 52%-48%, which sent the global market tumbling as the pound’s value fell significantly.
The immediate fear in the US markets were short lived – the DOW and NASDAQ rebounded quickly and enjoyed a buying frenzy on discounted stock prices. Commodities on the other hand had a mixed effect. Oil prices dropped below the $50 mark, while precious metal prices rose.
Global Worries
Many analysts believe that the drop in oil is only a temporary setback caused by economic uncertainty for the global community. Investors are unsure what effect the UK leaving the Eurpean Market will truly have on the global economy in the short and long term. Higher precious metal prices are a good indicator of fear in the markets as a “safe-haven” commodity.
Short Term Setback
While the Brexit decision did have an effect on oil prices, it is not seen as a long-term setback for energy. The pound’s value dropped significantly after the EU Referendum, which causes the dollar to gain value. Any time the dollar gains value, commodities like oil become more expensive to purchase overseas and can dampen demand.
However, the real reason for the drop in oil according to this Reuters article long term uncertainty for the global economy. Manufacturing is already down in China and the UK, and analysts are not sure how the departure of the UK will hurt global demand for oil.
While we still have a long way to go in the Houston area, things are looking up for oil despite the recent dip following the Brexit decision. Some are even predicting a massive Texas oil boom, which would be a welcome sight to everyone.
To learn more about the EU Referendum, Brexit, and oil news, take a look at the following stories below:
Oil dips back below $50 on wider economic worries
Pound Edges Up On Dollar While Yen Falls
The UK’s EU referendum: All you need to know
To get the latest updates on oil and energy news, like our Facebook page, and follow us on Twitter and Instagram. You can see what the guys from Jonathan’s are up to on their personal Instagram pages below:
