U.S. crude halted a three-day losing skid on Tuesday, amid an easing dollar, as threats of an impending worker strike in Norway offset continuing fears of a potential recession throughout the euro area in the wake of last week’s historic Brexit referendum.
On the New York Mercantile Exchange, WTI crude for August delivery traded between $46.54 and $47.94 a barrel before closing at $47.86, up 1.54 or 3.36% on the session. Previously, U.S. crude futures had tumbled 7% from 10-month highs earlier this month, amid considerable downward pressure from Britain’s decision to leave the EU. A session earlier, WTI crude slid below $47 a barrel to touch near six-week lows. On the Intercontinental Exchange (ICE), brent crude for September delivery wavered between $48.01 and $49.32 a barrel, before settling at $49.23, up 1.46 or 3.06% on the day. Both the international and U.S. benchmarks of crude used a late rally in the final minutes to close near session highs.
U.S. crude futures are still up more than 60% from 13-year lows in mid-February at $26.05 a barrel.
Crude prices received a boost on Tuesday from news out of Norway that up to 7,500 workers in the oil and gas industry could go on strike on Saturday if a new labor deal is not reached later this week. The union workers in Norway, one of the top crude producers in the euro area, are hoping to complete a new wage deal before midnight on July 1. Last week, Reuters reported that 280 rig workers on Rowan Companies’ Viking and Gorilla rigs and a host of state-run oil fields received a 0.5% wage hike to avert a potential strike, according to a state-appointed mediator. Last month, the International Energy Agency (IEA) reported that Norway pumped nearly 2 million barrels per day, representing 2.1% of the world’s total monthly output.
In Scotland, meanwhile, Parliament approved a vote to provide first minister Nicola Sturgeon with a mandate to begin discussions to protect Scotland’s relationship with the EU. Scotland voters backed the Remain campaign by a 62-38% margin, raising concerns that the nation could seek a re-vote on a 2014 referendum to leave the E.U. If successful, a bitter land dispute between ensue between the U.K. and Scotland on a swath of oil fields in the areas surrounding the North Sea.
Investors turned their attention to a closely-watched two-day EU Summit in Brussels for clearer indications on the timing of Britain’s exit from the European bloc. During the previous session, analysts from Goldman Sachs (NYSE:NYSE:GS) predicted that last week’s Brexit vote could tip the U.K. into mild recession by early next year. A number of prominent oil experts have expressed significant concerns that demand for crude could falter if economic growth throughout the euro area declines sharply.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.35% to an intraday low of 95.93, before rallying to 96.31 in U.S. afternoon trading. A day earlier, the index hit a three-month high as the Pound crashed to a fresh 31-year low against the Dollar.
Dollar-denominated commodities such as crude become more expensive for foreign purchasers when the dollar appreciates.
Despite the recent upswing in oil prices, crude prices are still down by more than 50% from their peak of $115 a barrel two years ago.