DW: Brexit brings uncertainty, prolongs pressure on oil prices
The oil and gas sector, still facing low oil prices, has yet another impact to deal with following the vote results in the UK’s EU referendum with 52 percent votes in favor of leaving the European Union.
According to energy industry consultancy, Douglas-Westwood, the impact of the referendum outcome could immediately be seen in the plunge in the value of the pound to US$1.34, as well as “significant falls in all of the world’s stock exchanges and the price of Brent tumbling 5 percent to $48/bbl.”
DW further adds that the greatest risk to the energy industry is a global economic slowdown, which would suppress oil prices for longer and delay investment in exploration and production.
However, in the short term, UK-listed companies such as Shell, BP and Tullow have fared well since the decision with a large proportion of dollar-denominated revenue from abroad the devaluation of Sterling benefiting the companies that will see a boost in reported revenues.
In a recent comment on the EU referendum vote, Shell said it is ready to work with the UK government and European institutions on any implications for its business.
On the other hand, the effect on the end-user in the UK is opposite, as a significant proportion of the oil is imported into the United Kingdom, and its prices will rise as a result of the exchange rate movement.
Douglas-Westwood’s Steve Robertson added that what is left now is a perception of risk generated by uncertainty over what ‘Brexit’ means. Negotiations have not yet started, and despite voters opting to leave the EU, the UK’s government could well decide not to leave the union.