Forexpros – Crude oil futures were under pressure during European morning trade on Wednesday, falling to the lowest level since November as growing fears over a possible Greece exit from the euro zone prompted investors to shun riskier assets ahead of a summit of European leaders later in the day.
Easing concerns over a disruption to Iranian oil supplies and worries over the global growth outlook further weighed on prices.
On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD91.17 a barrel during European morning trade, shedding 0.75%.
It earlier fell by as much as 1.1% to trade at USD90.86 a barrel, the lowest since November 3.
Market sentiment was rattled after former Greek Prime Minister Lucas Papademos said that the debt-laden country had no choice but to stick with a painful austerity program or face a damaging exit from the euro zone. Papademos also warned that preparations for a Greek exit were being considered.
Meanwhile, investors eyed a meeting of European leaders in Brussels later in the day, amid concerns over a divide between France’s new President Francois Hollande, who favors measures designed to support growth and pro-austerity Germany.
The ongoing Greece fears have roiled global equity and commodity markets since the start of May. NYMEX-traded oil prices have fallen nearly 14% in the past three weeks.
Energy prices came under further pressure after the chief of the U.N. nuclear agency said Tuesday that he reached a deal with Iran on probing suspected work on nuclear weapons, increasing the prospect of a resolution to a conflict over the issue.
Later in the day, Iran will hold talks with the U.S., the U.K., France, China, Russia and Germany in Baghdad.
Concerns over the health of the global economy kept prices on the back foot. The World Bank cut its economic growth forecast for China this year to 8.2% from 8.4% and urged it to rely on easier fiscal policy to boost consumption rather than state investment to lift activity.
China is the world’s second largest oil consumer after the U.S. and has been the engine of strengthening demand. A deeper slowdown in China, the world’s second-biggest economy, would impair a global expansion that is already faltering because of Europe’s austerity measures.
Oil traders were looking ahead to the U.S. Energy Information Administration’s closely-watched weekly report on U.S. stockpiles of crude and refined products later in the day.
The report was expected to show that U.S. crude oil stockpiles rose by 1 million barrels last week to the highest level since August 1990, underscoring fears over a slowdown in oil demand from the U.S.
After markets closed Tuesday, the American Petroleum Institute, an industry group, said that U.S. crude inventories rose by 1.48 million barrels last week, above expectations for an increase of 0.95 million barrels.
The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for July delivery slumped 1% to trade at 107.35 a barrel, with the spread between the Brent and crude contracts standing at USD16.18.
Brent crude, the European benchmark, is nearly 15% off its intraday high of USD128.38 hit on March 1.
A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.
But revived talks between Iran and major powers over Tehran’s nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.
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