Oil prices retreat as Greek default looms

[NEW YORK] Oil prices dropped on Monday, joining other global markets in retreat on the looming threat of a Greek debt default.

US benchmark West Texas Intermediate for August delivery fell US$1.30 to US$58.33 a barrel on the New York Mercantile Exchange.

European benchmark Brent oil for August delivery shed US$1.25 at US$62.01 a barrel in London.

"Greece, Greece, I think it's primarily Greece," said Kyle Cooper, analyst at IAF Advisors in Houston. "The whole situation, the prospective default, this adds uncertainty." Global equity markets fell sharply after Greece and its creditors failed to reach an agreement on a deal to release bailout funds in time for Greece to meet a 1.5 billion euro (S$2.3 billion) debt payment to the International Monetary Fund due Tuesday.

Standard & Poor's downgraded Greece's credit rating deeper into junk territory, saying the government's decision to hold a referendum on the creditors' bailout proposals brought it closer to default and an exit of the eurozone.

Other factors behind the drop in oil prices were worries about economic weakness in China, a big oil importer, and the prospect that nuclear negotiations between Iran and global powers could lead to a deal that lifts sanctions, paving the way for more Iranian crude to hit the oversupplied international market.

AFP

Read more on the Greek crisis here.