Forexpros – Crude oil futures were sharply lower on Tuesday, as growing concerns that Greece and its private bondholders will not meet the deadline to complete a debt swap prompted investors to shun riskier assets, while receding fears over Iran’s nuclear program also contributed to losses.
On the New York Mercantile Exchange, light sweet crude futures for delivery in April traded at USD105.03 a barrel during European morning trade, tumbling 1.6%.
It earlier fell by as much as 2.2% to trade at USD104.64 a barrel, the lowest since February 17.
Markets remained jittery ahead of the March 8 deadline for bondholders to join the agreement under which they will exchange their existing Greek government bonds for new paper in a swap deal.
At least 66% of private sector bondholders must be willing to participate in the deal.
A failure to agree on the swap would put the country back on the brink of a messy sovereign debt default and could reignite fears about the collapse of the single currency.
Meanwhile, worries over the outlook for the global economy lingered after China cut its 2012 growth target to 7.5% and after data confirmed that the euro zone economy contracted in the fourth quarter.
The news prompted investors to shun riskier assets, such as stocks and commodities, and flock to traditional safe haven assets like the U.S. dollar.
The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.52% to trade at 79.83, the highest since February 16.
Meanwhile, reports that Iran will allow United Nation nuclear inspectors to visit a previously off-limits military complex in Parchin also added to the selling pressure.
An International Atomic Energy Agency report last year said that Iran had built a large containment chamber at the Parchin military complex, southeast of Tehran, to conduct explosives tests that are “strong indicators” of efforts to develop an atom bomb.
The IAEA requested access to Parchin during high-level talks in Tehran in February, but the Iranian side did not grant it.
The report did not give a date for such a visit, while Iranian diplomats and IAEA officials were not immediately available for comment.
Oil prices have been well-supported in recent months amid ongoing tensions between Iran and the West and a potential disruption to oil supplies from the region.
Growing tensions between Iran and Israel also remain in focus. There are fears that an escalation of hostilities between Israel and Iran could set off a conflict across the region and send oil prices skyrocketing.
In a speech at a conference of the American Israel Public Affairs Committee on Monday, Israeli Prime Minister Benjamin Netanyahu called on the international community to acknowledge the fact that Iran was developing nuclear weapons.
Netanyahu added that Israel “cannot afford to wait much longer” and warned that his country would not live in the “shadow of annihilation.”
Netanyahu is expected to meet Congressional leaders later Tuesday and meet with U.S. Secretary of State Hillary Clinton.
Meanwhile, markets were awaiting fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil demand in the world’s largest oil consumer.
The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles rose by 1.5 million barrels last week, while gasoline inventories are expected to decline by 2.0 million barrels.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for April delivery dropped 1.35% to trade at 122.14 a barrel, with the spread between the Brent and crude contracts standing at USD17.11.
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