With the Brexit campaigning suspended after the murder of a lawmaker, crude oil prices and energy-related exchange traded funds bounced on hopes that the halt in campaigning may have sapped the momentum for a United Kingdom break away from the European Union.
On Friday, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, rose 3.2% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, gained 3.3% after both funds declined 9% over the past week.
Related: Traders Look to ETFs to Profit from Falling Oil Prices
Meanwhile, WTI crude oil futures were up 2.8% to $47.5 per barrel and Brent crude oil futures were 3.2% higher to $48.7 per barrel on Friday.
While a British exit from the European bloc or so-called Brexit may not have a direct effect on oil prices, the subsequent volatility could drag on riskier assets like commodities and add to concerns over a global slowdown in energy demand. Moreover, commodities may find pressure from a strengthening U.S. dollar as many expect the British pound to depreciate following a break.
“It’s mainly Brexit at the moment, at least until next Thursday, before people start to look at the more fundamental oil/commodity drivers again,” ABN Amro’s senior energy economist Hans van Cleef told Reuters.
[related_stories]The Brexit vote has been gaining momentum in recent weeks, with polls showing more Brits leaning toward a leave vote. However, observers argued that momentum may have slowed after the U.K. temporarily suspended campaigning in response to the killing of British lawmaker Jo Cox ahead of the vote on June 23 – Cox backed the stay vote.
Related: More Good News For Oil: Some See 20% Upside
According to Oddschecker calculations based on bookmakers’ quotes, odds on the U.K. leaving the union slipped as low as 36% after hitting a record 44% on Thursday, Bloomberg reports.
“The market turned, more than anything, because some of the hedge fund-embedded bets took an abrupt turn when the probabilities changed,” Jim Paulsen, chief investment strategist at Wells Capital Management Inc., told Bloomberg. “At a minimum, a move away from Brexit was augmented by the unfortunate incident when the British minister was shot. That suspended the hot debate, and if anything it seemed to mute some Brexit momentum.”
For more information on the energy markets, visit our oil category.
United States Oil Fund