By Jenny W. Hsu

Oil prices extended their decline in early Asian trade Monday as repercussions from U.K.'s unexpected decision to leave the European Union continue to rattle financial markets, putting risk assets such as oil under stress.

Analysts tip volatility to linger and said oil prices could test $45 a barrel support in the near term.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $47.16 a barrel at 0134 GMT, down $0.48 in the Globex electronic session. August Brent crude on London's ICE Futures exchange fell $0.38 to $48.03 a barrel.

Oil prices plunged by nearly 7% at one point Friday as the U.K. upended most expectations by becoming the first country to vote to leave the EU. The move triggered a selling spree across the global markets and sent the U.S. dollar soaring. An appreciating greenback makes oil more expensive for traders using different currencies.

Though oil prices have pared some losses since Friday, they will continue to face more headwinds before stabilizing, analysts said.

"The market did get ahead of itself and complacency was the pain trade. Buckle up for Monday, volatility is not ready to fade yet," ANZ Research cautioned in a morning note.

The vote to leave the U.K., known as "Brexit", will likely have minor impact on the global oil supply and demand since the U.K. accounts for less than 2% of the world's oil demand, but the move has shaken investors confidence in the region's economic growth. One fear is that it could spark a chain reaction with other EU members following U.K.'s footsteps.

Moreover, the vote raises questions over oil production in Scotland's North Sea as Scottish leaders are suggesting another secession vote to break away from the U.K. The U.K. produces nearly a million barrels of oil a day, or about 1% of global output.

A potential slowdown in investment could also mean less output, which would help narrow the supply and demand gap in oil.

"One a positive note, the vote could delay producers' investment plans, making them hesitant to bring back investment even with a bounce in prices, especially in the U.S.," said Morgan Stanley in a note.

The bank said the most crucial factors in oil remains--oil supply, China demand, and macro outlook. On Friday, the number of active rigs digging for oil in the U.S. fell for the first time in four weeks, according to data by industry group Baker Hughes.

"The thing is people will continue to drive their cars and they will still need fuel during the winters," said Aaron Lynch, an analyst at OptionsXpress.

"Soon or later, the fundamentals will take over to push prices higher," he added.

Nymex reformulated gasoline blendstock for July--the benchmark gasoline contract--fell 28 points to $1.5222 a gallon, while July diesel traded at $1.4523, 30 points lower.

ICE gasoil for July changed hands at $430.00 a metric ton, down $5.00 from Friday's settlement.

Nicole Friedman contributed to this article.

Write to Jenny W. Hsu at jenny.hsu@wsj.com

(END) Dow Jones Newswires

June 26, 2016 23:03 ET (03:03 GMT)

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