Brent crude slid below US$60 a barrel for the first time since April amid speculation that Greece’s rejection of austerity measures would prompt its exit from the euro zone.
Futures dropped as much as 1.6 per cent in London, falling for a second day. Sixty-one per cent of voters backed the Greek prime minister Alexis Tsipras’ rejection of further spending cuts and tax increases. Oil last week slumped the most since March because of speculation that the Greek crisis threatens Europe’s economic stability and growth, prompting investors to eschew riskier assets.
“We’ve seen a bit of a capitulation in oil,” Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. “The situation in Greece has a confidence impact on demand. A nuclear agreement with Iran is a negative risk for oil in terms of the possible significant increase in supply.”
The US secretary of state John Kerry tempered expectations on Sunday that a nuclear deal with Iran was imminent as diplomats meeting in Vienna worked toward a Tuesday deadline. Iran, the fourth-largest member of Opec, has estimated it could double crude exports from about 1 million barrels a day within six months of sanctions being lifted.
Brent for August settlement declined as much as 97 cents to $59.35 a barrel on the London-based ICE Futures Europe exchange and was at $59.61 at 12.46pm Singapore time. The contract lost 4.7 per cent last week. The European benchmark traded at a premium of $4.74 to West Texas Intermediate, the US marker grade.
WTI for August delivery dropped as much as $2.49, or 4.4 per cent, to $54.44 a barrel from the close on July 2 in electronic trading on the New York Mercantile Exchange. There was no floor trading Friday because of the Fourth of July holiday and transactions will be booked Monday for settlement purposes. Total volume was more than twice the 100-day average.
The Greek referendum result reverberated quickly across Europe’s political establishment. Within hours of the first projections, the German chancellor Angela Merkel and the French president Francois Hollande called for a summit of euro-zone leaders on Tuesday, with banks including JPMorgan Chase saying a Greek departure from the euro zone was now the most probable scenario.
In Vienna, Mr Kerry said on Sunday that while progress continued to be made on a nuclear agreement, “we are not yet where we need to be on several of the most difficult issues”. The talks may extend a day or two beyond Tuesday’s deadline, Iran’s Fars news agency reported.
Iran remains a long way off from selling more crude, according to Goldman Sachs, Bank of America and Société Générale. Its goal of boosting exports by 50 per cent would require an extra 500,000 barrels a day of production, which the banks predicted would take six to 12 months as the country revives ageing oil wells.
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