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Oil prices down in Asia as Greece and China weigh
[SINGAPORE] Oil prices fell in Asia on Wednesday on fears about Greece's future in the eurozone after it was hit with a bailout reform ultimatum, while analysts said the bloodbath in Chinese equities was spilling into other markets.
US benchmark West Texas Intermediate for August delivery dropped 14 cents to US$52.19 a barrel and Brent tumbled 13 cents to US$56.72, both reversing an earlier uptick.
"The global picture for commodities does not bode well," said Bernard Aw, market strategist at IG Markets in Singapore.
Commodities such as oil were taking a beating "with the Greece situation getting from bad to worse" and the stocks plunge in China stoking fears across Asian markets, he said.
Shanghai stocks plunged nearly seven percent on Wednesday morning as additional government moves failed to staunch a more than three-week sell-off that has seen in plunge by about a third.
Hong Kong equities sank 4.74 per cent and market-watchers warned of contagion.
"China's stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and liquidity crunch," said Zheng Ge, an analyst at Wanda Futures Co.
The crises are putting pressure on oil prices at a time when the global crude market is already oversupplied, analysts said. China is the world's second biggest economy and its top energy consumer.
European leaders gave debt-stricken Greece a final deadline of Sunday to reach a new bailout deal and avoid crashing out of the euro, after Greek voters rejected international creditors' plans in a weekend referendum.
Rising US crude production and a possible return of Iranian oil to global markets - should western powers and Tehran reach a deal on its nuclear programme - are widely expected to amplify the global supply glut.
Negotiators from Iran and major world powers holding last-ditch meetings in Vienna effectively gave themselves until Friday to reach a deal. An agreement will allow the West to lift punishing economic sanctions that have curtailed Iran's oil exports.
Traders were also awaiting the release later Wednesday of the weekly US crude inventory report, a closely watched barometer of demand in the world's top oil consuming nation, analysts said.