Forexpros – Crude oil futures came under heavy selling pressure during U.S. afternoon trade Monday, but are well off their lows, as investors cut their exposure to riskier assets after Spanish borrowing costs spiked to a new euro-era high.

Appetite for riskier assets also weakened as optimism surrounding Greece elections over the weekend began to fade.

On the New York Mercantile Exchange, light sweet crude futures for delivery in July traded at USD83.37 a barrel during U.S. afternoon trade, dropping 1.12%. Price earlier plunged to a session low of USD82.37 per barrel

The July contract is due to expire at the end of Wednesday’s trading session. Contract expiration often leads to volatile sessions as market participants look to close out positions or reposition their portfolios.

The yield on Spanish 10-year bonds surged to a euro-era high of 7.28% earlier, climbing above the critical 7% threshold which prompted bailouts in Greece, Ireland and Portugal.

The spike in borrowing costs came in spite of efforts to insulate Madrid from the effects of the ongoing sovereign debt crisis by agreeing on a EUR100 billion aid package for Spanish banks.

Meanwhile, the yield on Italian 10-year bonds ticked up to 6.17% from 5.87%, amid fears over sovereign debt contagion from Spain and Greece.

Spain became the fourth euro zone nation to seek a rescue last week. Some investors fear it is only a matter of time before Italy becomes the next country to ask for help.

Oil prices were higher during the Asian trading session, as market sentiment firmed up following a victory for the pro-austerity New Democracy party in weekend elections in Greece.

But investors remained cautious amid concerns over whether a viable coalition government can be formed.

Later in the day, a two-day Group of 20 summit was due to begin in Mexico, amid hopes it could produce fresh measures to combat the crisis in Europe.

Market sentiment had been roiled in recent weeks amid growing fears over an imminent Greek exit from the single currency bloc.

There are worries that the region’s worsening sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.

Oil traders were also focusing on talks between Iran and world powers over Tehran’s disputed nuclear program in Moscow later in the day.

Iran and Western nations have been locked in a stand-off in recent months. The U.S. and its allies worry the program is aimed at developing a nuclear weapon, and have stepped up sanctions against the country in recent months, including a European oil-import ban set to start July 1. Iran says its nuclear program is for peaceful purposes.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for August delivery dropped 1.9% to trade at 95.72 a barrel, with the spread between the Brent and crude contracts standing at USD12.94.

Prices fell to a 17-month low of USD95.61 a barrel earlier in the day.

London-traded Brent prices are down nearly 25% since hitting an intraday high of USD128.38 on March 1.