SINGAPORE: Oil prices fell in Asia on Wednesday on fears about Greece’s future in the eurozone days ahead of a bailout reform ultimatum, while analysts said a bloodbath in Chinese equities was spilling into other markets.
US benchmark West Texas Intermediate for August delivery dropped 27 cents to $52.06 a barrel and Brent tumbled 31 cents to $56.54 in afternoon trade, both reversing an earlier uptick.
“The global picture for commodities does not bode well,” said Bernard Aw, market strategist at IG Markets in Singapore.
Oil and other raw materials are taking a beating “with the Greece situation getting from bad to worse” and the rout in Chinese equities stoking fears across Asian markets, he said.
Shanghai stocks plunged nearly seven percent on Wednesday morning after new government measures failed to staunch the bloodletting that has wiped around a third of China’s main sharemarket in under a month.
Hong Kong equities also sank 4.74 percent, leading a drop in Asian equities as market-watchers warned of contagion spreading to other markets.
“China’s stock market rout is now spreading to other financial markets, creating a sweeping sense of panic and liquidity crunch,” said Zheng Ge, an analyst at Wanda Futures Co.
Meanwhile, European leaders have given debt-stricken Greece a final deadline of Sunday to reach a new bailout deal and avoid crashing out of the euro, after Greek voters rejected international creditors’ latest plans in a weekend referendum.
The crises are putting pressure on oil prices at a time when the global crude market is already oversupplied, analysts said.
Rising US crude production and a possible return of Iranian oil to global markets if Western powers and Tehran reach a deal on its nuclear program, touted to be sealed in Vienna this week, are widely expected to amplify the global supply glut.
Negotiators from Tehran and major world powers have effectively given themselves until Friday to reach a last-ditch agreement that would allow the West to lift the punishing economic sanctions that have curtailed Iran’s oil exports.
Traders were also awaiting the release later Wednesday of the weekly US crude inventory report, a closely watched barometer of demand in the world’s top oil consuming nation, analysts said.