Oil futures took a hammering on Friday (24 June), mirroring turmoil in the equity and foreign exchange markets, after the UK voted to exit the European Union.
At 5:02pm BST, the Brent August contract was down 4.42% or $2.25 at $48.66 per barrel, while the West Texas Intermediate was 4.29% or $2.15 lower at $47.96, as the equities sell-off, plunge in the pound sterling and fear of global economic contagion weighed on trading sentiment.
However, many traders felt the decline pointed to short-term volatility. Michael Wittner, global head of oil market research at Societe Generale, said the initial crude market response is all about risk aversion.
"We're getting big moves now but there will probably be little impact, if any, in the longer-term."
The natural resources team at Investec added that crude futures were behaving in line with the wider commodities market sell-off with base metals such as copper also heading lower.
"The only commodity that is not sliding is gold owing to safe-haven demand. The flight to safety is clearly evident, with strong volumes noted across the precious metals space," a spokesperson added, with COMEX gold futures up 4.62% at $1,321.50 an ounce, at 5:24pm BST.
However, Brexit might constitute a double blow for the UK oil and gas industry in a 'lower for longer' oil price environment, according to Scott Lehman, vice president of product management at Petrotechnics.
"Brexit brings a new period of uncertainty for the UK oil and gas sector - the full effects of which may not be realised for some time. As a mature oil and gas region, the low oil price environment is likely to have by far the biggest impact on the future prosperity of the UK North Sea," he added.