Oil prices slide as hopes for Greece fade
The price of oil slipped to near $83 a barrel Monday as optimism over the results of the Greek elections was overshadowed by lingering concerns about the eurozone's continuing debt crisis, particularly in Spain.
By early afternoon in Europe, benchmark oil for July delivery was down 75 cents to $83.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 12 cents to settle at $84.03 in New York on Friday.
In London, Brent crude for August delivery was down 94 cents at $96.67 per barrel on the ICE Futures exchange.
In Greece, the conservative New Democracy party, which supports a bailout deal the country agreed to earlier this year, appeared to win enough votes Sunday to form a ruling coalition with another pro-bailout party.
Investors had been bracing for a victory by parties that favored rejecting the austerity measures needed to ensure bailout money keeps flowing, a move traders feared could spark a financial crisis in Europe and beyond.
"In the short term, the markets will be confident that the election result will give Greece some breathing room," strategist Sean Darby of Jefferies Group said. "But longer term, investors cannot be assured that the political upheaval is over."
Despite the cheers for Greece, investors pushed yields in Spain above 7 percent a year for 10-year bonds, a level considered unsustainable and above which Greece, Portugal and Ireland had to request international bailouts.
"Given that the (Greek) government will likely push for an easing of austerity measures ... the outlook for Greece remains far from certain, particularly as the debt crisis is spilling over into Spain and potentially Italy," said analysts at JBC Energy in Vienna.
The Greek election result initially boosted the euro, which helped underpin crude prices early in the session. A weaker U.S. dollar makes commodities traded in dollars such as oil cheaper for investors with other currencies. The euro, however, fell back to $1.2623 from $1.2637 late Friday in New York.
This week, investors will be closely watching central bank meetings, especially one by the U.S. Federal Reserve on Thursday, for signs policymakers plan to implement stimulus measures to boost flagging global economic growth.
Also in focus are talks in Moscow between Iran and six global powers seeking to find common ground about the Islamic Republic's nuclear program. Led by the United States, several countries have put in place oil sanctions against Iran, one of the world's key suppliers, especially for parts of Europe and Asia.
"Because the risk premium has now been entirely eliminated, the oil price is likely to respond by rising more sharply if the talks fail than it would fall if a breakthrough were achieved," said a report from Commerzbank in Frankfurt.
In other energy trading, heating oil was down 1.47 cents at $2.6318 per gallon while gasoline futures lost 1.7 cents at $2.6840 per gallon. Natural gas gained 2.8 cents at $2.495 per 1,000 cubic feet.
