Oil Drops Amid Greek Turmoil, Iran Nuclear Talks in Focus

29 Jun 2015 | Author: | No comments yet »

Oil Drops Amid Greek Turmoil, Iran Nuclear Talks in Focus.

TOKYO Oil prices fell more than $1 on Monday, with U.S. crude dropping to its lowest in almost three weeks below $59 per barrel, after Greece imposed capital controls as lenders refused to extend the country’s bailout.Oil futures moved lower in electronic trade early Monday, pushed down by concerns about a possible Greek default and a consequently stronger U.S. dollar.Crude-oil futures fell in Asian trade Monday amid fears of an escalating crisis in Greece and the looming deadline for the Iranian nuclear talks on June 30. Greece took steps to forestall growing strains on its crippled financial system on Sunday, closing banks and imposing capital controls that brought the prospect of being forced out of the eurozone into plain sight.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in August traded at $58.80 a barrel at 0059 GMT, down $0.83 in the Globex electronic session. Indeed, it could be somewhere in the middle of 2016 till we start eating into inventories on a global basis so we’re relatively cautious in terms of upside,” Gunvor Group’s head of market research and analysis, David Fyfe, said. “On the flip side, at $60, a lot of people are stopping developing new projects, there’s maybe a million barrels a day (of oil) by 2017 that’s not going to be there.

Stock and currency markets also fell in Asia. “As far as the oil market is concerned, the potential ramifications are downward,” said Ric Spooner, chief market analyst at Sydney’s CMC Markets. Banks in Greece will be closed and the stock market shut all week, and there will be a daily 60 euro limit on cash withdrawals from cash machines, which will reopen on Tuesday. The drop came as stocks sold off across Asia following Greece’s decision to hold a referendum on the nation’s bailout terms, significantly raising the risk of a default.

Nymex oil futures lost 0.57% last week and have fallen for two consecutive weeks, while Brent crude gained 0.38% last week and have risen for two of the past three weeks. The Greek fears also drove investors into some “safe haven” assets, including the U.S. dollar, with the ICE Dollar Index up 0.7% for the day at 96.15, according to FactSet. Iran is backtracking from an interim nuclear agreement with world powers three months ago, Western officials suggested on Sunday, as U.S. and Iranian officials said talks on a final accord would likely run past a June 30 deadline. Securing an historic agreement would end a more than 12-year nuclear standoff between Iran and the West and open the door to suspending sanctions that have crippled the Iranian economy. “The deadline is likely to be extended so that makes it a little less at the cutting edge of thinking right now,” Spooner said. “But we have rallied a fair way so the market is a bit vulnerable to increases in supply.”

He said a flight to safe-haven assets could hit Asian emerging market currencies, equity markets and local bond markets as investors rebalance their portfolios. Oil markets generally shrugged off any impact from further monetary easing measures by China over the weekend, with the People’s Bank of China cutting its benchmark interest rates and the reserve-requirement ratio. While recent Chinese trade data points to signs of a economic slowdown, oil refining and product demand still appears robust, Adam Longson, head of energy research at Morgan Stanley, said. He said China’s demand for transport fuels appears strong, especially for gasoline, even though China has repeatedly increased fuel consumption taxes since the oil price rout began. The U.S. and its negotiating partners are preparing for the talks to extend past Tuesday as officials said there are still tough issues left to resolve. “Iran will continue to be restricted to its existing supply relationships until compliance can be verified,” Barclays said in a report.

It says the verification process can take at least 4-8 months and more Iranian crude will only flow by the first-quarter of 2016 at the earliest, even if the deal is concluded by July 5. Nymex reformulated gasoline blendstock for July–the benchmark gasoline contract–fell 219 points to $2.0266 a gallon, while July diesel traded at $1.8465, 163 points lower.

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