Brent falls $2/bbl on strong US dollar, Greece austerity plan

27 June 2011 09:40  [Source: ICIS news]

SINGAPORE (ICIS)--Crude futures fell sharply on Monday, with ICE Brent falling more than $2/bbl at one stage, undermined by a stronger US dollar, and concerns over Greek debt and financial stability in the Europe.

At 8:09 GMT, August Brent on London’s ICE futures exchange was trading at $103.46/bbl, down by $1.66/bbl from the previous close. Earlier, the North Sea benchmark fell to a session low of $102.28/bbl, down by $2.84/bbl.

August NYMEX light sweet crude futures were trading at $90.30/bbl, down by 86 cents/bbl from the previous close. Earlier, the contract fell to an intra-day low of $89.82/bbl, down by $1.34/bbl.

The US dollar gained ground against the euro and other leading currencies as investors sought safety amid worries over European debt issues. The move led to international investors to exit dollar denominated oil markets.

Euro fell amid concerns over the ability of the Greek Government to pass widely unpopular austerity measures through parliament this week.

The Greek Government needs to pass the plan, which involving tax increases and spending cuts totalling some €28bn ($39bn) over five years, in order to receive further funding from the EU and IMF.

The EU and IMF funding worth €12bn forms part of the €110bn bailout agreed between Greece, the EU and the International Monetary Fund (IMF) last year.

The Greek government has said it requires the funds by July in order to avoid defaulting on its debt.

There are concerns that a default by Greece could place huge pressures on other troubled eurozone economies such as Portugal and Spain and trigger a series of defaults by European nations.

Equity markets fell on worries over European debt with the Nikkei 225 stock Index in Japan was down 1.04% on Monday.

Crude prices fell to their lowest level last week since late February with ICE Brent plunging around 7%.

Crude fell amid concerns over slowing global economy and easing supply worries after that the International Energy Agency (IEA) announced on 23 June that it will release 60m bbls of oil from emergency reserves over 30 days.

The move by the IEA, which represents consuming nations in the developed world, is a response to concerns over the ongoing disruption of oil supplies from Libya and worries that greater tightness in the oil market threatens the global economic recovery.

($1 = €0.71)

By: James Dennis
+65 6780 4359

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