After ‘turbulence,’ oil rebounds from sharp losses

Friday 03/07/2015
Uncertainty and worries

Singapore - Oil rebounded Tuesday on bargain-hunting after prices plunged a day earlier as Greek defiance against austerity measures imposed by its creditors sparked turbulence in global markets.

Prices also rose ahead of an emergency summit on Greece by eurozone leaders in Brussels Tuesday, after Greek citizens overwhelmingly rejected creditors' demands for further belt-tightening in a referendum.

Around midday in London, Brent North Sea crude for August delivery gained 88 cents to $57.42 a barrel compared with Monday's close.

West Texas Intermediate for August added 62 cents to $53.15 a barrel in New York.

"The market is trying to consolidate after the price plunge. People are buying on bargains," said Daniel Ang, an investment analyst with Phillip Futures in Singapore.

On Monday Brent had slumped $3.78 and WTI by $4.43 in highly volatile trade, as traders fretted over Greece and slowing global economic growth.

"Crude oil prices plunged yesterday as Greek uncertainty and worries over a slowdown of the Chinese economy weighed on market sentiment," noted Sucden analyst Myrto Sokou.

Analysts say one of the results of the Greek referendum could be an exit from the eurozone currency union, which could trigger a contagion effect.

With Greece's economy gasping for air, authorities there extended an eight-day bank closure until Thursday amid fears cash machines in the country were running dry.

Ang said the oil market is also watching the top-level negotiations in Vienna between Western powers and Iran on Tehran's nuclear ambitions, although indications are that both sides were set to miss yet another deadline Tuesday to nail down an agreement.

In a sign of how complex the negotiations have become, foreign ministers met deep into the night Monday grappling with the toughest remaining issues which have so far thwarted a deal.

An agreement will put pressure on oil prices as it will lead to the West lifting crippling economic sanctions against Iran and allow Iranian oil to flow back into an already oversupplied market.