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[MELBOURNE] Brent slid below US$60 a barrel for the first time since April amid speculation Greece's rejection of austerity measures will prompt its exit from the euro area.
Futures dropped as much as 1.6 per cent in London, falling for a second day. Sixty-one per cent of voters backed Prime Minister Alexis Tsipras's rejection of further spending cuts and tax increases. US Secretary of State John Kerry tempered expectations that a nuclear deal with Iran is imminent as diplomats meeting in Vienna work toward a Tuesday deadline.
Oil last week slumped the most since March amid speculation the Greek crisis threatens Europe's economic stability and growth, prompting investors to eschew riskier assets. Iran, the fourth-largest member of the Organization of Petroleum Exporting Countries or Opec, has estimated it could double crude exports from about 1 million barrels a day within six months of sanctions being lifted.
"We've seen a bit of a capitulation in oil," Ric Spooner, a chief analyst at CMC Markets in Sydney, said by phone. "The situation in Greece has a confidence impact on demand. A nuclear agreement with Iran represents a negative risk event for oil in terms of the possible significant increase in supply."
Brent for August settlement declined as much as 97 cents to US$59.35 a barrel on the London-based ICE Futures Europe exchange and was at US$59.77 at 11.45 am Singapore time. The contract lost 4.7 per cent last week. The European benchmark traded at a premium of US$4.75 to West Texas Intermediate, the US marker grade.
WTI for August delivery dropped as much as US$2.49, or 4.4 per cent, to US$54.44 a barrel from the close on July 2 in electronic trading on the New York Mercantile Exchange. There was no floor trading Friday because of the Fourth of July holiday and transactions will be booked Monday for settlement purposes. Total volume was more than twice the 100-day average.
The Greek voting result 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 on Tuesday, with banks including JPMorgan Chase & Co saying a Greek departure from the euro is now the most probable scenario.
In Vienna, Mr 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.