Strong U.S. Dollar, Global Uncertainty Weigh on Oil ETFs

A rush toward safe-havens and the sudden surge in the U.S. dollar are dragging on crude oil prices and energy-related exchange traded funds after the unexpected results from the United Kingdom’s referendum on its membership in the European Union.

The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, declined 2.5% and 2.3%, respectively, on Monday. USO is now trading below both its 50- and 200-day moving averages while BNO fell below its short-term trend line.

Meanwhile, WTI crude oil futures were down 1.1% to $48.85 per barrel and Brent crude was 2.4% lower to $47.3 per barrel.

Crude oil prices were trending lower for the second day in a row after Britain’s decision to exit the E.U., known as “Brexit.” The vote has triggered uncertainty over the stability of the global economy and financial system, weighing on the future growth outlook.

Related: A Very Bullish Call for Oil ETFs

The oil market continued to slip Monday as the U.S. dollar strengthened – commodities are priced in U.S. dollars and become more expensive to foreign buyers if the greenback appreciates. The U.S. Dollar Index (DXY), which tracks the USD’s movement against a basket of major international currencies, rose 0.59% to 96.48 late Monday.

Related: Finally Time For Dollar ETFs to Rally

Goldman Sachs Group recently warned in a note that China, the world’s second-largest oil consumer and a major driver for global growth, will be trying to ward of another yuan devaluation as investors turn to the USD or Japanese yen and other safe-haven assets, according to the Wall Street Journal.