Oil futures slid for a fifth straight session--sinking to lows not reached since Dec. 19--on fears that political turmoil in Greece may leave the country unable to meet the terms of its bailout--and stir more instability for the euro zone.
Light, sweet crude for June delivery on the New York Mercantile Exchange settled at $97.01, down 93 cents, or 0.9% for the day, after rebounding from a session low of $95.52. Prices are down 8.6% over the last five trading days. June Brent futures settled down 43 cents, or 0.38%, to $112.73 on the Intercontinental Exchange.
"Any other news you see is going be overshadowed by the fact that this whole Greek experiment may not work," says Zachary Oxman at TrendMax Futures. "I absolutely think (oil) will crack through $95 tomorrow."
Talks to form a new coalition government in Greece have made little progress. Politicians against the European Union's bailout program--and its severe austerity measures for Greece--could gain control of Greece's parliament. That would cast doubt on whether Greece would remain in the monetary union--and on the future of the euro itself.
Fears about Europe caused the euro to briefly dip below $1.30 to the dollar, sending some shivers in the oil market, said Rich Ilczyszyn, chief market strategist and founder of iiTrader.com. The euro moved back above that threshold, but the rising dollar also hurt oil futures, which are denominated in dollars. The U.S. currency and oil prices tend to move inversely, as a stronger dollar makes crude more expensive for buyers in other currencies.
Adding downward pressure was an announcement from Saudi Arabia saying that the world's largest oil producers thought prices had more room to fall.
Saudi Oil Minister Ali Naimi told reporters Tuesday morning that "oil prices were too high" and hinted that the Organization of Petroleum Exporting Countries could discuss raising its output ceiling at its meeting next month.
Total OPEC crude-oil output rose to 31.26 million barrels a day in April, up 1.3% from a revised March production figure of 30.85 million barrels a day, the U.S. Energy Information Administration said Tuesday. Saudi Arabia production held steady at 9.8 million barrels a day, while Libya, Nigeria, Iraq and Angola posted output increases.
Increased OPEC output would come just as U.S. oil inventories are already high. Adding pressure to the market are expectations that American Petroleum Institute data due to be released later in the day will show continued weak U.S. oil demand and another increase in U.S. oil inventories, which are at their highest level in 22 years.
Demand for oil should remain muted because of expected lackluster fuel sales this summer. Gasoline demand last week in the U.S., the world's largest oil consumer, was below 8.6 million barrels a day, down 5.8% year over year, according to data released Tuesday by MasterCard Advisors LLC, a division of MasterCard Inc. (MA).
"I see nothing to suggest any demand-led surge in prices, as the global economy is going nowhere quick," said Dominick Chirichella, analyst at Energy Management Institute.
Reformulated-gasoline-blendstock futures for June delivery settled at $2.9944 a gallon, up 0.6%.
June heating-oil futures were at $2.9901 a gallon, up 0.2%.
Copyright (c) 2012 Dow Jones & Company, Inc.
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