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NEW YORK, United States – Oil prices tumbled on Wednesday as traders weighed Greece’s deepening debt crisis and a surprise increase in US crude-oil inventories.
US benchmark West Texas Intermediate (WTI) for August delivery dived $2.51 to $56.96 a barrel, its lowest level in more than two months.
Brent North Sea crude for August closed at $62.01 a barrel in London trade, down $1.58 from Tuesday’s settlement.
“The petroleum markets are back on the defensive, with ongoing uncertainty over Greek debt and solid US payroll gains” that helped push up the dollar, said Tim Evans of Citi Futures. A stronger greenback makes dollar-priced crude oil more expensive for buyers using other currencies.
Greece’s debt crisis deepened on Tuesday when its EU bailout expired and the country failed to make a key IMF debt payment, heightening fears the country was headed for a Eurozone exit. European leaders on Wednesday declined to consider any fresh financial assistance before Greece’s controversial bailout referendum on Sunday.
“The Greece debt crisis may have stoked concerns of a contagion effect to the Eurozone, which means that we could see a drop in demand for oil on potentially weaker growth,” said Bernard Aw, a strategist at IG Markets.
WTI opened more than $1 lower and accelerated its losses after the Department of Energy reported an unexpected increase in US crude stockpiles last week.
US commercial crude supplies rose by 2.4 million barrels to 465.4 million, near a record high for this time of year, the DoE said. That snapped an eight-week streak of declines which had suggested stronger demand in the world’s top crude consumer.
Evans said the market was recognizing that oil supplies remained high. He pointed to early estimates of a further increase in June OPEC production and the DoE reporting an increase in April US crude oil production to slightly more than 9.7 million barrels per day.
“There are lots of negative factors,” said James Williams of WTRG Economics. The economist cited optimism on a nuclear deal with Iran that would lift oil sanctions, weakness on the Chinese equities market that may indicate lower demand in the Asian giant, and Greece’s crisis.