Oil dropped to the lowest level in more than two months in London amid concern Greece’s failure to reach a deal with international creditors will prompt its exit from the euro area.
Global equities fell as the Greek government imposed capital controls and shut banks. French Foreign Minister Laurent Fabius said Iran’s top diplomat, Mohammad Javad Zarif, left nuclear talks in Vienna for discussions with the country’s leaders on removing sanctions, suggesting the issue remains a major hurdle to a deal. Crude stockpiles in Europe’s trading hub rose to the highest in at least two years.
Oil is heading for monthly declines in London and New York as the Greek crisis deepens. Crude’s 10 percent advance this year has encouraged U.S. producers and OPEC’s biggest members to pump at a record pace, signaling a global glut may persist.
“Today’s move is all about the Greek situation,” John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund that focuses on energy, said by phone. “Investors are trying to sort it all out and react accordingly. We’re going to see episodes of intense selling until there’s a resolution.”
Brent for August settlement decreased $1.25, or 2 percent, to end the session at $62.01 a barrel on the London-based ICE Futures Europe exchange. It’s the lowest close since April 15. Prices are down 5.4 percent in June.
West Texas Intermediate for August delivery fell $1.30, or 2.2 percent, to settle at $58.33 a barrel on the New York Mercantile Exchange. It’s the lowest close since June 8. Total volume was 41 percent below the 100-day average at 2:59 p.m. Prices have dropped 3.3 percent this month. The U.S. benchmark grade settled at a $3.68 discount to Brent.
Greece ordered banks to be closed until at least July 6, with a daily limit on cash withdrawals, according to a government decree. Just days before the June 30 expiry of the current bailout and a $1.7 billion payment due to the International Monetary Fund, Prime Minister Alexis Tsipras on Friday called for a July 5 referendum on creditor demands.
Sustained U.S. job gains have helped bolster the dollar this year. The Labor Department is set to report June employment figures on July 2.
“Clearly, the increase in risk aversion and a strong dollar are bearish for crude oil.” Mike Wittner, head of oil research at Societe Generale SA in New York, said by phone. “The dollar is already gaining strength because of Greece and may get another boost later this week when the June jobless data is released.”
Iran’s Zarif gave no reason for his departure, which came just 48 hours before a self-declared deadline for an accord on capping Iran’s nuclear program. Diplomats are close to clinching a deal, Federica Mogherini, the European Union’s foreign policy chief said Sunday.
Iranian officials have repeatedly called for all sanctions -- which have halved Iran’s oil exports since 2012 and cut it off from investment and the global financial system -- to be lifted once a deal is agreed. The U.S. and its allies want the curbs to be removed in phases as Iran is shown to be implementing any deal.
“The market is also paying attention to the Iran talks,” Wittner said. “Any additional supply shouldn’t be a factor until next year, but an agreement would have a major impact on market sentiment.”
Iran has estimated it could double oil exports from about 1 million barrels a day within six months of international sanctions being lifted. It’s currently the fifth-largest producer in the Organization of Petroleum Exporting Countries.
Crude stockpiles in the Amsterdam, Rotterdam and Antwerp area rose to 60.6 million barrels in the week ended June 19, according to data from Genscape Inc., a firm that monitors supplies. That’s the most in data going back to February 2013.