[MELBOURNE] Brent slid below US$60 a barrel for the first time since April amid mounting concern about economic stability in Europe and Asia.
Futures dropped as much as 2.9 per cent in London to the lowest in almost 12 weeks. European leaders will hold an emergency summit on Tuesday after Greek voters rejected creditors' bailout terms. China is seeking to restore investor confidence after the Shanghai Composite slumped since mid-June. US Secretary of State John Kerry tempered expectations that diplomats in Vienna will quickly reach a deal with Iran.
Oil last week slumped the most since March amid speculation the Greek crisis prompted investors to eschew riskier assets. Iran, the fourth-largest member of the Organization of Petroleum Exporting Countries, has estimated it could double crude exports from about 1 million barrels a day within six months of sanctions being lifted.
"We are entering a week in an environment where China is starting to panic about the plunge of its stock market, Brussels is in shock about the results of the Greek referendum and where a breakthrough deal with Iran is likely to be announced," Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, said by e-mail.
Brent for August settlement declined as much as US$1.72 to US$58.60 a barrel on the London-based ICE Futures Europe exchange, the lowest since April 14. The contract traded at US$58.65 at 11:45 am London time. The European benchmark traded at a premium of US$4.34 to West Texas Intermediate, the US marker grade.
WTI for August delivery dropped as much as US$2.68, or 4.7 per cent, to US$54.25 a barrel from the close on July 2 in electronic trading on the New York Mercantile Exchange. There was no floor trading on Friday because of the Fourth of July holiday and transactions will be booked on Monday for settlement purposes.
The result of the Greek vote on Sunday reverberated quickly across Europe's political establishment. Within hours of the first projections, German Chancellor Angela Merkel and French President Francois Hollande called for a summit of euro-area leaders Tuesday, with banks including JPMorgan Chase & Co saying a Greek departure from the euro is now the most probable scenario.
In Vienna, Kerry told reporters on Sunday that while progress continues to be made on a nuclear agreement, "we are not yet where we need to be on several of the most difficult issues." The talks may extend a day or two beyond Tuesday's deadline, Iran's Fars news agency reported, citing a senior diplomat.
Iran remains a long way off from selling more crude, according to Goldman Sachs Group Inc, Bank of America Corp and Societe Generale SA. Its goal of boosting exports by 50 per cent would require an extra 500,000 barrels a day of production, which the banks predicted will take six to 12 months as the nation revives aging oil wells.
The market may see additional supplies from floating storage if a nuclear deal is reached with Iran, Morgan Stanley analysts including Adam Longson said in an e-mailed report dated July 6.
The Shanghai Composite completed its biggest three-week tumble since 1992 on July 3. A group of 21 brokerages led by Citic Securities Co. will invest at least 120 billion yuan (US$19.3 billion) in a stock-market fund, the Securities Association of China said the next day.
"The impact of the lower economic growth and falling equity markets in China could impact the physical oil demand and the market sentiment stronger than the Greek drama," Eugen Weinberg, head of commodities research at Commerzbank AG in Frankfurt, said by e-mail.