By Barani Krishnan
NEW YORK (Reuters) – Oil prices fell for a fifth straight day on Wednesday, their longest losing stretch since February, on worries Britain might leave the European Union while the U.S. Federal Reserve signaled plans for two U.S. rate hikes this year despite slower growth expectations.
A weekly draw in U.S. crude stockpiles helped crude futures pare losses during the session, before prices fell again in post-settlement trade.
Brent crude futures’ front-month
The front-month in U.S. crude’s West Texas Intermediate (WTI) futures
Goldman Sachs said in a note that crude would need to trade at $45-$50 per barrel for the market to reach a supply deficit in the second half of 2016.
Oil prices have fallen without a break since June 8, for a total loss of about 7 percent. Just a week ago, Brent hit 2016 highs of nearly $53 a barrel and WTI reached toward $52 after a rash of supply disruptions, mostly out of Nigeria and Canada.
Wednesday’s decline came as global markets slumped on fears that Britain could vote on June 23 to leave the EU. The dollar <.DXY> dipped against a basket of currencies but remained close to a June 3 high on worries of the so-called Brexit. A stronger dollar makes crude, priced in the U.S. currency, costlier in the euro and others. [MKTS/GLOB] [FRX/]
The Fed kept interest rates unchanged for June as it lowered economic growth forecasts for 2016 and 2017. But it still signaled two rate increases this year.
“The downgrade of the economy by the Fed is definitely weighing on crude oil prices aside from the Brexit concerns,” said John Kilduff, partner at New York energy hedge fund Again Capital.
“For oil to maintain its recent rally, we are looking for strong demand going forward. That’s been taken away, and you still have rate hike possibilities to contend with.”
U.S. crude stockpiles fell by 933,000 barrels last week, the government-run Energy Information Administration (EIA) said, versus market expectations for 2.3 million-barrel draws. [EIA/S]
“It’s a mixed bag,” Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland, said of the EIA data, which also showed a bigger-than-expected draw in gasoline stocks and a surprise build in distillates that included diesel.
“This will do little to move the needle in either direction for oil prices and the energy market will continue to get its cue from macro-economic environment and global equity markets,” Jarvis added.
(Reporting by Barani Krishnan; Additional reporting by Amanda Cooper in LONDON; Editing by David Gregorio and Richard Chang)