Oil prices slumped to a three month low pressured by mounting concerns that Greece would default on its debts and exit the Euro after its Euro zone partners refused to extend its bailout program.
Light sweet crude for August demand most recently fell by $1.20 or 2.01% to $58.51 a barrel on the New York Mercantile Exchange. This is the third straight loss for the US benchmark after ending last week in the red.
Brent for August delivery, the global benchmark, most recently shed $1.30 or 2.06% at $61.96 a barrel on the London based ICE Futures Exchange. This is the lowest the global benchmark has been in more than three weeks.
“It’s all about Greece today. Also, the Iran deadline for a nuclear pact could be pushed out by a week or so from tomorrow, so it’s a risk-off day,” Tariq Zahir, an oil bear at Tyche Capital Advisors in Laurel Hollow, New York, told Reuters.
Greece’s financial condition worsened after the announcement by the European Union with the country moving fast to close down its banking system for six days to buy it more time to resolve the crisis.
The move increased fears that Greece would leave the European Union and cast doubt on the future of the common currency itself.
Though the situation in Greece did not have any direct effect on oil, analysts are saying that the anxiety and uncertainty surrounding the country has ripple effects felt by most financial assets.
The uncertainty has also strengthened the dollar against a basket of foreign currencies. A stronger greenback is bearish for the demand of commodities denominated in dollars as it makes them more expensive to holders of other currencies.
“The ongoing uncertainty caused by Greece kick-started a flight from crude at … and news of progress relating to Iranian sanctions has only served to endorse this move,” Matt Smith, director of commodity research at ClipperData, told Market Watch.
“Markets hate uncertainty, and the possibility of Greece exiting the euro has markets rattled.”
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