Bunkers Jump, Oil Rebounds Back Over $50/bbl as Brexit Panic Fades, but Citi Warns Uncertainty and Volatility Will Persist

The few observers who predicted that the U.K.'s exit from the European Union would cause extremely short-lived market turmoil may be proven correct

If Wednesday's numbers are any indication, the few observers who predicted that the U.K.'s exit from the European Union would cause extremely short-lived market turmoil may be proven correct: oil jumped over 3 percent and Brent crude rose above the $50 per barrel mark after dropping under $47/bbl earlier this week.

Bunkers responded Wednesday with double-digit gains in some of the primary ports, including Singapore and Rotterdam, and Ship & Bunker's Global 20 Ports Average for IFO380, which tracks the average bunker price across ports responsible for the majority of global bunker volume, hit a 2016 high of $252.50 per metric tonne (pmt).

While several unrelated factors are said to account for the rise, including the possibility of an oil workers' strike in Norway and the ongoing crisis in Venezuela's energy sector, the new general consensus amongst pundits is that Brexit is a matter of fading concern.

However, Citi analysts warned that, "Uncertainty and volatility ... are both likely to be persistent for a long time to come."

Cooler Heads Right All Along?

Prior to the Brexit vote and during the height of the panic over what might happen if the U.K. decided to follow a path of self-determination, Fereidun Fesharaki, chairman of FGE, patiently told CNBC analysts that Brexit would bring down oil prices "for a day or two, and then soon they would realize it makes no difference"; then he suggested that analysts instead focus on "all this oil which is offline, in Libya, in Canada, in Nigeria: if they all gush back together, then people can begin to run for the door."

As Brexit makes a quicker than expected exit in the collective psyche of market players, other disclosures take center stage, first and foremost a report from the U.S. Energy Information Administration (EIA) that crude stockpiles fell 4.1 million barrels in the week to June 24 (more than 2.4 million barrels expected by many analysts).

John Kilduff, partner at Again Capital, attributed this to "the stepped-up demand by refiners and a plunge in imports."

But the EIA's further disclosure of gasoline stocks having an unseasonably large increase of 1.4 million barrels caused others to take a pessimistic long-term view of oil: "We firmly feel any rally will stall out near the $50 level, as we have seen unjustified gains in previous weeks for gasoline based on the build number we have now," said Tariq Zahir, managing partner at Tyche Capital Advisors.

To which Scott Shelton, energy futures broker with ICAP, added, "I am still unimpressed with overall crude draws for June: with 16.7 million barrels per day of crude runs and production declines, we should have larger drawdowns for Q2.

"That has simply not happened."

While calling the U.K. vote "an historic event," Dominick Chirichella, senior partner at the Energy Management Institute, said earlier this week, "markets will not remain in turmoil as they are at the moment for an extended period of time.

"There is no indication that the global financial markets are anywhere near a meltdown as we saw in 2008; the UK will not collapse and the EU will not collapse anytime soon."