World oil prices plunged over USD 2.00 a barrel today amid a surging dollar and financial markets turmoil after Britain's surprise vote to leave the European Union.
Around 1440 GMT, both the US and London benchmark crude futures contracts were down four percent or more, after having clawed back sharper losses from earlier in the day.
West Texas Intermediate for August delivery lost USD 2.04 (4.0 per cent) at USD 48.07 a barrel. When trade opened WTI fell to USD 47.57.
In London, Brent North Sea crude for August delivery, the international benchmark, was down USD 2.21 (4.3 per cent) at USD 48.70 a barrel. It had traded as low as USD 47.54 hours earlier.
Britain's historic vote to withdraw from the European Union sent shudders through global markets today amid concerns about the decision's negative impact on the global economy.
"The election in the UK has driven the dollar sharply higher and sent oil prices tumbling," said Gene McGillian of Tradition Energy. A stronger greenback makes dollar-priced crude more expensive for buyers using rival currencies.
McGillian noted the uncertainties surrounding Britain's withdrawal from the EU, "especially how this impacts the global economy and energy demand."
Tim Evans of Citi Futures cautioned that today's oil market moves are just an initial reaction and not the full price adjustment to Britain's decision.
He offered the possibility of a short period of consolidation or upward correction, with some argument that none of the supply and demand fundamentals for the market have changed.
"However, we think confidence has been shaken and that the lack of physical tightness exposed by the initial decline will be highlighted, leading to a further wave of selling," Evans said.
