US oil settles at 5-week low, at $46.21, as dollar jumps on Brexit fear

An oil pump jack in Gonzales, Texas.
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An oil pump jack in Gonzales, Texas.

U.S. oil prices slumped more than 2 percent to close at a five-week low on Thursday, as the dollar's rally on fears of Britain's exit from the EU hammered commodities priced in the currency.

The sixth straight day of declines marked the longest bear run for crude futures since January.

Also weighing on the oil complex was a lower-than-expected drawdown in U.S. crude inventories in spite of peak summer driving demand in the United States.

Brent crude fell $1.67, or 3.4 percent, at $47.29. The session low of $47.09 marked its lowest price since May 12, after touching an eight-month high of nearly $53 a barrel a week ago.

Front-month U.S. crude futures settled at $46.21 a barrel, down $1.80, or 3.8 percent.

The dollar was up 0.2 percent at $1.12 against the euro, as equity and other global markets were gripped by fear that Britain will vote in a week to leave the European Union, triggering economic slowdown on the continent and beyond.

"It is mainly risk aversion ahead of the Brexit vote next week so we see some profit-taking on recent long positions ahead of this event," said Hans van Cleef, senior energy economist at ABN Amro in Amsterdam.

With a week to go before Britain votes on whether to leave the European Union, oil and other markets remain in thrall to opinion polls, which are increasingly showing those supporting an exit are in the majority.

"With investor positions already at a record high since the beginning of the year, they might want to reduce some of the risks," said Abhishek Deshpande, lead oil analyst at Natixis.

European stocks also slid on Thursday after the Bank of Japan refrained from taking further stimulus steps, hours after the U.S. Federal Reserve struck a cautious note on its policy outlook.

The dollar was also underpinned by hints from the Federal Reserve on Wednesday that there may be two U.S. rate hikes this year despite slower-than-expected growth. A stronger dollar makes oil and other commodities priced in the greenback less appealing to holders of the euro and other currencies.

U.S. crude inventory drawdowns over the last month have not provided much support to oil prices.

The U.S. Energy Information Administration said domestic crude inventories fell 933,000 barrels last week, less than half the 2.3-million-barrel decrease forecast.

On Thursday, market intelligence firm Genscape reported a decline of 76,317 barrels in stockpiles at the Cushing, Oklahoma delivery point for WTI futures during the week to June 14, traders who saw the data said. In the previous week to June 7, Genscape reported a drawdown of 299,058 barrels at Cushing.

"With investor positions already at a record high since the beginning of the year, they might want to reduce some of the risks," said Abhishek Deshpande, lead oil analyst at Natixis.