Oil prices, along with global stock markets, suffered one of their worst slides in recent history Friday following the British vote to leave the European Union.
The Nikkei in Japan closed down more than 7 percent in Friday trading, leading the massive sell-off triggered by the British vote."The stability of financial markets including the foreign exchange market is crucially important," the Bank of Japan said in a statement. "Excess volatility and disorderly movements in exchange rates can have adverse implications for economic and financial stability and hence are not desirable."
Already, Japan is feeling the strains of lingering economic recession. Weakness in Asian economies emerged in early 2016 as a drag on crude oil prices, as global demand was far too soft to compensate for the extra supplies of crude oil on the market.
Crude oil prices lost major ground in early trading in New York. The price for Brent crude oil, which originates from four oilfields in the North Sea, lost 4.7 percent to start trading Friday at $48.48 per barrel. West Texas Intermediate, the U.S. benchmark price for oil, was down 4.5 percent to open at $47.86 per barrel.
Oil prices broke through the $50 per barrel threshold in mid-June amid signs the energy market was returning to balance.
Some downward pressure emerged early this week, however, after data from the U.S. Energy Information Administration on crude oil storage, an indication of demand, was lower than analysts had expected.
A joint statement from the leaders of the European Union recognized the free and democratic process of the referendum, but urged the British government to get on with it for the sake of stability.
"We now expect the United Kingdom government to give effect to this decision of the British people as soon as possible, however painful that process may be," they said. "Any delay would unnecessarily prolong uncertainty."
Markets could get a minor lift later in the morning Friday after U.S. oil services company Baker Hughes releases data on rig counts. As oil prices held steady around $50 for most of June, some recovery in oil and gas exploration, which is reflected in rig counts, had emerged. More telling will be data released in one week as it will offer a gauge of industry confidence in the wake of the British exit from the European Union.
For the British energy sector, Oil & Gas U.K. said in a statement the industry is "at a critical juncture."
By Daniel J. Graeber
Copyright © UPI, 2022. All Rights Reserved.