Forexpros – Crude oil futures dropped to a three-day low on Monday, as markets awaited the outcome of talks on a Greek debt swap deal as well as a key European summit later in the day, while ongoing tensions between Iran and the West were also in focus.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at USD98.89 a barrel during European morning trade, declining 0.67%.
It earlier fell by as much 0.85% to trade at USD98.72 a barrel, the lowest since January 25.
Concerns over talks aimed at restructuring Greek debt persisted, weighing on market sentiment. An agreement is necessary for Greece to secure the next tranche of bailout funds in order to prevent a sovereign debt default.
The Financial Times reported over the weekend that Germany was pushing to institute European Union oversight of Greece’s budget, but Greek Finance Minister Evangelos Venizelos later dismissed the report, saying that any such move would be unnecessary.
Earlier Monday, German Finance Minister Wolfgang Schaeuble said in the Wall Street Journal that the euro zone may refuse to grant Greece a fresh bailout unless it convinces Europe that it can fully implement commitments attached to earlier bailout packages, highlighting tensions between Berlin and Athens.
Also adding to the gloom, the yield on Portuguese 10-year bonds continued to spike higher, hitting a euro-lifetime high of 15.77%, amid renewed fears the country may need a second international bailout.
Investors were also cautious ahead of the European Union summit in Brussels later in the day. The ministers were expected to finalize discussions on a German-led deficit-control treaty and sign off on a EUR500 billion permanent rescue fund to be set up this year.
Euro zone developments have dominated trading in the oil market for the last several months, amid worries that the sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.
The news boosted demand for the U.S. dollar, which tends to weigh on dollar-denominated oil futures contracts. The dollar index, which tracks the performance of the greenback against a basket of six other major currencies, was up 0.5% to trade at 79.34.
Meanwhile, oil traders continued to eye a possible disruption to Iranian oil supplies after the Islamic Republic sent mixed signals in its ongoing dispute with the West, vowing to stop oil exports soon to “some” countries but postponing a parliamentary debate on a proposed halt to crude sales to the European Union.
Iranian media reported Friday that the country’s parliament was expected to consider a plan to pre-empt a European embargo on its oil by halting its exports to the region as early as next week.
The European Union announced on January 23 that it would ban oil imports from Iran starting July 1 to pressure the Persian Gulf nation over its nuclear program.
Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery dipped 0.41% to trade at USD111.00 a barrel, with the spread between the Brent and crude contracts standing at USD12.11 a barrel.
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