Many reasons why oil has barrelled south, says analyst

With oil prices having barrelled 10% down from their 2016 high, Accendo Markets suggested a "non-exhaustive" list of around a dozen likely reasons, including the strong dollar, weak sterling as well as supply issues.

Number one reason for Accendo was the US dollar's strength. The US dollar basket has recently been testing the 95.5 level, noted head of research Mike van Dulken, which is a hitherto resistant trendline of falling highs dating back to late January.

Sterling and the euro remain weak against the USD on Brexit fears with most recent more polls suggesting the Vote Leave campaign has moved in front of the Remain camp, even extending its lead, which could seep overseas and especially lead to havoc in the euro zone.

"The USD itself is benefiting from some safehaven seeking - like the Yen - as gold makes fresh 22-month highs and silver guns for 2016 highs," Van Dulken added.

With oil and commodities denominated in USD, a stronger USD tends to hinder prices by making it more expensive to buy for those using other currencies, he noted, and vice versa.

"Next, while a dovish Federal Reserve outlook is normally good for oil via a weaker USD, it’s no good when other currencies are headed other way.

"A Fed worried about a Brexit vote means it sees a potential meaningful impact on US and global growth which is bad for perceived demand for oil - and raw materials in general."

Some weakness in supply issues have been resolved of late. Van Dulken noted a curtailing of disruption from Nigeria and Canada as one key reason, while the OPEC cartel remains an unknown quantity with discord in its ranks and still pumping more than the world needs.

The US rig count has also turned, which suggesting more supply on the way, "which makes sense as the shale/frackers said $45-50 would tempt them back".

As well as weekly crude stocks data last week also revealed a smaller than expected drawdown, implying less demand than hoped, other global data has also rattled hopes, with the latest International Energy Agency (IEA) report suggesting no global oil market rebalance before mid-2017.

Van Dulken also added that the latest US jobs report also had markets jittery again about the strength of US economic recovery and thus demand for oil.

"After an 80% rally for Crude and 90% from Brent from the 2016 lows, some simple profit-taking is to be expected ahead of Brexit vote," he concluded. "And that $50 market was always going to be a hurdle."