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Crude oil near five-month low as Greece uncertainty weighs

Published 05/08/2012, 03:56 AM
Updated 05/08/2012, 03:56 AM

Investing.com - Crude oil futures came under pressure for a fifth day during European morning trade on Tuesday, as investors continued to cut their exposure to growth-linked assets amid concerns over the impact of weekend elections in Greece on the euro zone’s ongoing debt crisis.

On the New York Mercantile Exchange, light sweet crude futures for delivery in June traded at USD97.02 a barrel during European morning trade, retreating 0.95%.

It earlier fell by as much as 1.15% to trade at a session low of USD96.81 a barrel. Prices touched USD95.36 a barrel on Monday, the lowest since December 20, 2011.

Investors remained jittery after weekend election results in Greece and France raised doubts over Europe’s ability to implement austerity measures deemed necessary to tackle the debt crisis in the region.

Efforts to patch together a coalition government in Greece so far have failed, fuelling fears that the debt-strapped country may not have a government in place in time to secure its next tranche of international aid next month.

There are worries that the region’s sovereign debt crisis could trigger a broader economic slowdown that would curb demand for oil.

The euro zone accounted for nearly 12% of global oil consumption in 2010, according to data from British Petroleum.

Prices came under further pressure after Saudi Arabia’s Oil Minister Ali al-Naimi said that his country is storing as much as 80 million barrels of crude to boost global supplies in response to prices that are “still a little bit high.”

Mr. al-Naimi added that the Kingdom was pumping around 10 million barrels of oil per day. Saudi Arabia is the world’s largest oil producer and exporter.

Meanwhile, market participants were awaiting fresh weekly information on U.S. stockpiles of crude and refined products to gauge the strength of oil 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 rose by 2.0 million barrels last week to the highest level since September 1990, underscoring fears over a slowdown in oil demand from the U.S.

The U.S. is the world’s biggest oil-consuming country, responsible for almost 22% of global oil demand.

Nymex crude prices have come under heavy selling pressure over the past week, losing nearly 9% since May 2, as concerns lingered over a widening economic slowdown that may cut demand for energy and as tensions have eased between Iran and Western nations over the country’s nuclear program.

Elsewhere, on the ICE Futures Exchange, Brent oil futures for June delivery was down 0.45% to trade at 112.66 a barrel, with the spread between the Brent and crude contracts standing at USD15.64.

Brent crude, the European benchmark, is more than 12% off its intraday high of USD128.38 hit on March 1.  

A potential loss of Iranian oil supplies has helped underpin strong gains in oil prices during late last year and the first quarter of this year.

But revived talks between Iran and major powers over Tehran's nuclear ambitions, along with rising Saudi Arabian and Libyan output and signs of slower U.S. economic and employment growth, helped pull oil prices back from first-quarter highs.

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