Oil prices suffered their biggest selloff in five months on Monday, falling as much as 8 percent as Greece’s rejection of debt bailout terms and China’s stock market woes set off a deepening spiral of losses.
Adding to the pressure on oil, Iran and global powers were trying to meet a July 7 deadline on a nuclear deal, which could bring more supply to the market if sanctions on Tehran are eased. The self-imposed deadline could be extended again, officials at the negotiations said.
A slump that began last week gathered pace through the session, taking four-day losses to more than 10 percent, the largest rout since early January, as weeks of range-bound trading abruptly ended. Global Brent prices collapsed below the $60 a barrel mark for the first time since mid-April.
“With the number of bearish elements weighing on the market now, the only support has been the seasonal demand in gasoline, and even that will be going away soon,” said John Kilduff, partner at New York energy hedge fund Again Capital.
U.S. crude settled at $52.53 a barrel, down $4.40 or 7.7 percent, from its settlement on Thursday and below the 100-day moving average. It was the biggest percentage drop in a day for U.S. crude since early February, and more downside momentum could push it to test the six-year low of $42.03 set in mid-March, technical analysts said.
Brent settled down $3.78, or 6.3 percent, at $56.54, also below the 100-day average.
Greeks voted a resounding no to a referendum on an international bailout that also put in doubt its membership in the euro. The euro fell against the dollar, weighing on demand for dollar-denominated commodities from holders of the single currency.
Commodities were also sucked into market turmoil that has seen Chinese shares fall as much as 30 percent since June due in part to the economy growing at its slowest pace in a generation.
In Vienna, a dispute over U.N. sanctions on Iran’s ballistic missile programme and a broader arms embargo were among issues holding up a nuclear deal between Tehran and six world powers.
Iran is seeking to restore oil exports that have dropped from 2.5 million barrels per day in 2011 to about 1 million bpd in 2014. Morgan Stanley analysts said up to 700,000 bpd in new Iranian exports were likely to arrive between late 2015 or early 2016, delaying the recovery in oil prices and U.S. output by 6 to 12 months.
Oil prices were also weighed down by signs that U.S. shale drillers were returning to the field, as the rig count for oil rose last week for the first time since December.
It is unclear whether the latest price decline will give drillers pause, though, as many oil producers had been counting on $60 or $65 prices to support new wells.