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Oil prices tumbled their most in three months on Monday, with US crude falling six per cent, after Greece's rejection of debt bailout terms and China's rolling out of emergency measures to support its stock markets shook global markets.
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 Iran are eased. The self-imposed deadline could be extended again, officials at the negotiations said.
US crude has fallen 10 per cent in all over three straight sessions and Brent over seven per cent in two consecutive days, the biggest rout since January. The slump brought oil out of its narrow trading band of the past three months, risking a deeper slide ahead.
"Even without Greece, China's stock market woes and Iran priming to hit the market with more barrels, the demand picture in oil has only been okay while the supply picture has been phenomenal," said John Kilduff, partner at New York energy hedge fund Again Capital.
"With these number of bearish elements weighing on the market now, the only thing of support has been the seasonal demand in gasoline, and even that will be going away soon."
US crude CLc1 was at $53.50 a barrel by 12:51 pm EDT, down $3.43 from its settlement on Thursday before Friday's US Independence Day holiday and below the 100-day moving average. If the six per cent drop is retained at the close, it will be the biggest daily loss in US crude since a seven per cent drop on April 8.
"A closing break below $54 could pave the way for a move down to $50," said Fawad Razaqzada, a London-based technical analyst for forex.com.
Brent LCOc1 fell $2.67, or 4.4 per cent, to $57.65, also snapping its 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 per cent since June due in part to the economy growing at its slowest pace in a generation.
In Vienna, a dispute over UN 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 one 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 US output by six to 12 months.
Oil prices were also weighed down by signs that US 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 a barrel prices to support new wells.
