Oil rises after on Greek election result

Oil rigs extract petroleum in Culver City, California. AFP FILE PHOTO

Singapore – Oil prices advanced in Asian trade Monday, mirroring gains in broader asset markets after Greece’s pro-austerity parties won a tight general election, analysts said.

New York’s main contract, light sweet crude for July delivery advanced 90 cents to $84.93 a barrel and Brent North Sea crude for August delivery surged $1.48 to $99.09 in morning trade.

Greece’s two main parties narrowly clinched enough votes Sunday to form a government, giving relief to dealers who had feared a victory for anti-bailout radicals would have led to the country being forced out of the eurozone.

Sunday’s crucial election was the second in six weeks in Greece after May 6 polls failed to produce a government, stirring fears that the political stalemate would paralyse efforts to bring Greece back from the brink.

Global financial markets have been monitoring the election closely because of its potential domino effect on other economies in the currency bloc and globally.

Greece has been forced to seek bailouts twice, first for 110 billion euros ($139 billion) in 2010 and then for 130 billion euros this year plus a 107 billion euro private debt write-off.

“Overall, the Greek election result, while welcome, does not imply that the Greek people are embracing the tough reforms tied to the bailout package,” analysts from Singapore’s DBS Bank said in a commentary.

“It merely meant that fear overruled anger. Put simply, the Greek people understood that if they voted to stay out of the euro, it would lead to sharply more pain in the immediate term.

“Consensus still believes that Greece will eventually leave the eurozone, and that the election has merely bought time for this eventuality.”