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Oil plunges as Britain votes to leave EU

Oil prices drop after BREXIT/AFP

Oil prices drop after BREXIT/AFP

SINGAPORE, Singapore, Jun 24 – World oil prices plunged more than 6.0 percent in Asia Friday after Britain voted to bolt out of the European Union, sending markets into a tailspin and fuelling fears of another global rout.

Crude tumbled sharply as results showed those wanting to exit the bloc were likely to win, fanning worries about the impact on demand as investors fled for safe investments.

At one point US benchmark West Texas Intermediate fell 6.21 percent to $47.00 and Brent was down 6.17 percent at $47.77.

They pared the losses later in the day and at around 0630 GMT, Brent dropped $2.14, or 4.20 percent, to $48.77 and WTI was down $2.18, or 4.35 percent, at $47.93.

The news sent Asian stock markets collapsing, with Tokyo down almost eight percent, Hong Kong losing more than four percent, and Seoul and Sydney more than three percent down each. Futures trading also suggested London would lose seven percent and Frankfurt six percent.

“Now is the time of the extreme volatility… a vote for Brexit, could bring a big tail risk to the market,” said CMC Markets analyst Margaret Yang.

“That is exactly why banks and brokerage firms have been on the alert, anticipating the risks and impacts that Brexit could bring to the market,” she added.

The Brexit vote “has clearly weakened the near-term outlook for the UK and global economies”, research house Capital Economics said.

However, it added that “we still think that it will ultimately prove to be less damaging than many estimates have suggested”.

Bernard Aw, an analyst with IG Markets in Singapore, said part of the reason for the plunge in oil prices was the strengthening of the dollar against the pound and higher-yielding currencies, which makes crude more expensive for holders of other units.

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The pound fell to its lowest level against the dollar since 1985, while Australia’s dollar was down 3.4 percent at one point, South Korea’s won dived 2.4 percent and the Indonesian rupiah shed 1.1 percent.

Malaysia’s ringgit was down 2.5 percent, one of its worst days since 1998.

“There’s a possibility that oil may fall more after the full results are out since we’ve already seen quite a plunge in the pound,” Aw told AFP.

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