Oil Price Slumps due to Global Economy

Oil price fell more than 4 percent on Tuesday as the unstable global economic market affected by U.K.’s vote to exit the European Union and traders worried about an uptick in U.S. drilling activity.

U.S. crude for August delivery recently fell $2.22, or 4.5%, to $46.77 a barrel on the New York Mercantile Exchange. Brent crude was down $2.22, or 4.3 percent, at $47.88 a barrel early morning.

Analysts said the uncertainty in the global economy, especially the Brexit drove the pound to a 31-year low, could suppress the oil demand compares to the previous optimistic growing expectation. “The concerns about financial stability in the Eurozone is causing another risk-off selloff in oil,” Phil Flynn, analyst at the Price Futures Group, said in a note.

On the other hand, the number of rigs drilling for oil in the U.S. rose by 11 in the past week, from Baker Hughes released on Friday. The rig count is viewed as a proxy for activity in the U.S. oil industry. The number of active rigs has plunged since late 2014 as prices fell to multiyear lows, but a recent rally from less than $30 a barrel to more than $ 50 has spurred some producers to put more rigs to work. Some investors say that prices around $50 could encourage new U.S. production and cause prices to retreat. In addition, the stronger U.S. currency may weigh on oil prices by making dollar-traded oil more expensive for foreign buyers.

Gasoline futures recently fell 5.3% to $1.4338 a gallon. Diesel futures were down 4.7% at $1.4410 a gallon.

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