Oil falls more than three percent on Greek vote

Greece’s rejection of EU bailout terms in snap referendum adds to downward pressure on oil prices, taking them to 12 week low

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

Oil prices fell sharply on Monday after Greece rejected debt bailout terms and China rolled out emergency measures to prevent a full-blown stock market crash, adding to fears of poor growth in demand at a time of global oversupply.

The result of the Greek referendum over bailout terms has put in doubt its membership in the euro, pulling down the European single currency against the dollar.

A strong dollar tends to put pressure on commodities as it makes fuel more expensive for holders of other currencies.

Commodities were also sucked into market turmoil that has seen Chinese shares fall as much as 30 percent since June due in part to an economy that is growing at its slowest pace in a generation.

Chinese brokerages and fund managers have agreed to buy massive amounts of stocks to support markets, helped by China's state-backed margin finance company, which in turn would be aided by a direct line of liquidity from the central bank.

"Uncertainty over Greece is bearish for oil. It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in US drilling rigs, and a potential increase in Iranian oil supply," said Olivier Jakob, senior energy analyst at Petromatrix in Zug, Switzerland.

"The main implication is for euro/dollar and I think it will put additional pressure on the euro," he added.

Benchmark Brent crude oil fell $2.04 a barrel to a low of $58.28 before recovering a little to around $58.75. US light crude fell as low as $53.91, down $3.02 from its close on July 2. July 3 was a US holiday.

The falls left both crude benchmarks at their lowest since mid-April.