By Georgi Kantchev and Christian Berthelsen Updated June 20, 2016 9:32 a.m. ET
Oil prices started the week higher Monday as global stock markets soared on growing expectations that the U.K. is likely to remain in the European Union after this weeks referendum.
The U.S. crude benchmark was up 2.3% at $49.07 a barrel on the New York Mercantile Exchange, while the global Brent contract was up 2.3% at $50.29 a barrel on the ICE Futures Europe exchange. Both contracts were rebounding for a second session after a six-day losing streak.
Opinion polls published over the weekend suggest the U.K. is more likely to vote to remain in the EU in Thursdays referendum. A poll by Survation published in the Mail on Sunday newspaper showed 45% supported remaining in the EU and 42% in favor of leaving. A poll-of-polls, averaging the past six polls in the U.K. vote, has returned to 50/50, while the bookmakers odds for Brexit fell sharply from last week.
The Stoxx Europe 600 jumped 3.7%, extending Fridays momentum, while the British pound surged 2% against the dollar. That followed gains in Japan and Hong Kong.
Traders are preoccupied with Thursdays British referendum, analysts at oil brokerage PVM said in a note to clients. We are likely to face volatile trading in the coming four to five days.
Market watchers say that while a British exit from the bloc, or Brexit, may not have a direct effect on oil, the market could suffer collateral damage. The ensuing turmoil could worsen sentiment for riskier assets such as commodities. Oil could also take a hit from a rising dollar, which analysts expect to strengthen if the U.K. votes to leave the EU
If there is a Brexit, the negative pressure on oil prices would be driven by risk aversion, not fundamentals, Michael Wittner, chief oil analyst at Socit Gnrale. Oil prices might fall by up to 5% if the U.K. votes to leave the bloc but those declines would be temporary, Mr. Wittner said.
The bullish outlook on the referendums outcome over the weekend has helped crude prices to defy negative factors, such as the resumption of oil production in Canada after wildfires and a further increase in the number of active rigs in the U.S.
Investors shrugged off another rise in the U.S. rig count, instead buoyed by continued signs that current prices are still unlikely to incentivize U.S. producers to increase production, said ANZ Research.
Oil prices have also been propelled by a weakening dollar. The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, fell 0.7% Monday. As oil is priced in dollars, it becomes less expensive for holders of other currencies as the dollar depreciates.
In refined product markets, gasoline futures were up 2.8% at $1.5465 a gallon, and diesel futures were up 2% at $1.5108 a gallon.
Jenny W. Hsu and Riva Gold contributed to this article.
Write to Georgi Kantchev at firstname.lastname@example.org and Christian Berthelsen at email@example.com