Crude oil futures trade near 3-week low ahead of Greek default

Investing.com - Oil futures traded near three-week lows on Tuesday, after a last-minute series of phone calls and offers failed to reach a breakthrough on Greece's debt package, setting the stage for a Greek debt default.

On the ICE Futures Exchange in London, Brent oil for August delivery inched up 6 cents, or 0.08%, to trade at $62.05 a barrel during European morning hours. A day earlier, London-traded Brent futures hit $61.35, the weakest level since June 5, before closing down $1.25, or 1.98%, at $62.01.

Elsewhere, on the New York Mercantile Exchange, crude oil for August delivery lost 11 cents, or 0.2%, to trade at $58.22 a barrel after touching a daily low of $57.96, a level not seen since June 5. On Monday, Nymex oil tumbled $1.30, or 2.18%, to end at $58.33.

Meanwhile, the spread between the Brent and the WTI crude contracts stood at $3.83 a barrel, compared to $3.68 by close of trade on Monday.

Greece’s bailout program was due to expire on Tuesday and without a rescue package in place Athens would almost certainly fall into arrears on a €1.6 billion loan repayment due to the International Monetary Fund later in the day.

A default by Greece would add to fears over the country’s solvency and fuel doubts over the condition of Greek banks and the collateral they use for European Central Bank loans.

Greece shut down its banking system on Monday, with lenders ordered to stay closed for six days, following a decision by the ECB not to extend a lifeline of emergency funding.

Athens broke off negotiations with creditors on Saturday and in a surprise move Prime Minister Alexis Tsipras called for a snap referendum to be held on July 5 on whether to accept the terms proposed by lenders for extending the country’s bailout.

European finance ministers refused a request from the Greek government to extend the bailout program until after the referendum.

A yes vote will mean that Greeks are willing accept the latest reforms offered by creditors to Athens, while a rejection will likely lead to Greece's exit from the single currency union.

The euro was down 0.65% to 1.1162, falling back towards the one-month lows of 1.0953 struck on Monday after the crisis in Greece escalated.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.43% to 95.49, boosted by the weaker euro.

Meanwhile, oil traders awaited the outcome of talks between Iran and world powers over Tehran's nuclear program, which could result in a flood of Iranian crude returning to the market which is already oversupplied.

A final nuclear agreement between Western powers and Iran over the country’s nuclear program is due June 30, but officials already acknowledged that talks will likely extend beyond the deadline.

Market participants also looked ahead to fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of demand in the world’s largest oil consumer.

The American Petroleum Institute will release its inventories report later in the day, while Wednesday’s government report could show crude stockpiles fell by 2.1 million barrels in the week ended June 26.

Worries over high domestic U.S. oil production, despite a declining rig count, have weighed on prices in recent weeks.

According to industry research group Baker Hughes (NYSE:BHI), the number of rigs drilling for oil in the U.S. fell by three last week to 628. The drop marks the 29th straight week of declines.

However, U.S. oil production has held around 9.6 million barrels a day in recent weeks, the highest level since the early 1970s.