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Oil Prices Dip 5% over Brexit, Global Economic Data Fears

July 5, 2016 at 18:35 by Andrew Moran

US crude is headed for its biggest daily loss in five months. Brent Crude prices are also experiencing declines on Tuesday. This comes as investors remain frightened over the Brexit fallout as well as the plethora of negative economic data coming in from all over the world.

August West Texas Intermediate crude futures dipped $2.49, or 5.08%, to $46.50 per barrel at 17:59 GMT on the New York Mercantile Exchange. This is the largest daily decline since February 9.

August Brent Crude futures fell $2.34, or 4.67%, to $47.76 a barrel on the ICE Futures exchange in London.

Oil prices — Brent and US crude — are up about 80% from February’s 12-year lows.

Investors fear that Britain’s decision to exit the European Union (EU) is leaving a great deal of uncertainty in both the nation’s economy and on global financial markets. This is causing many investors to allocate their money from riskier assets, like oil, into safe haven assets, like gold and bonds.

Tuesday’s dip was also due to weak economic data coming from the US. American factory orders dropped 1% in May following two consecutive months of gains. Orders for durable goods fell 2.3%, while demand for mining, energy-related equipment, and computers slipped 5.8%.

Traders are also expecting a flurry of negative economic data from China in the next couple of weeks. It is being anticipated that the results will show weaker trade and domestic investments, which will likely weigh down on oil prices.

Reports that Libya’s state energy company, National Oil Corporation (NOC), would be merging with its counterpart in eastern Libya offset steeper declines in oil prices by reports of attacks from militants in the Niger Delta on Tuesday morning. NOC Chairman Mustafa Sanalla said it was time to “unify National Oil Corporation.”

There is only one NOC, and it serves all Libyans. This agreement will send a very strong signal to the Libyan people and to the international community that the Presidency Council is able to deliver consensus and reconciliation. I am sure it will now build on this success to bring unity and stability to other government institutions.

The Niger Delta Avengers had recently come to a cease-fire agreement, but this was reportedly violated just days after. Nigeria has been recovering some of its oil output in recent weeks, which helped OPEC boost crude production in June. Nigerian oil firms have been working diligently to repair their infrastructure after the wave of attacks from the militants.

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