Oil extended its slide from a three-month low as investors eschewed risky assets amid speculation that China’s efforts to stem an equity rout are failing.
Futures fell as much as 1.7 per cent in New York for a fifth day of declines, the longest losing streak since May. The Shanghai Composite Index plunged as traders unwound margin bets at a record pace amid a slump that has eliminated more than US$3.5 trillion of value. Oil has given up this year’s gains as investors avoided risky assets amid concern over economic stability in Asia and Europe.
Diplomats in Vienna extended a deadline for a nuclear deal with Iran until July 10, slightly mollifying investor anxiety. Iran, the fourth-largest producer in Opec, plans to boost crude exports and recapture market share when sanctions are lifted.
“Prices are getting hit from all angles. We see very little optimism in the oil-futures market,” said Gordon Kwan, the Hong Kong-based head of regional oil and gas research at Nomura Holdings. “It will persist for at least the next two weeks until we see a visible return of confidence in China’s financial markets.”
West Texas Intermediate for August delivery decreased as much as 87 cents to $51.46 a barrel in electronic trading on the New York Mercantile Exchange and was at $51.61 midafternoon in Singapore. The contract dropped 20 cents to $52.33 on Tuesday, the lowest close since April 13. Prices are down 3.1 per cent this year.
Brent for August settlement slid as much as 85 cents, or 1.5 per cent, to $56 a barrel on the London-based ICE Futures Europe exchange. The European benchmark crude traded at a premium of $4.54 to WTI.
China’s government has attempted in recent weeks to stabilise the market with measures including raising margin requirements for sell orders and stock purchases by state-directed funds and interest-rate cuts. The country is the world’s biggest oil consumer after the United States.
Investors are moving to assets that offer some safety as China’s stock rout and Greece’s possible exit from the euro roil global markets. The yen climbed 0.6 per cent against the dollar as Treasuries rallied with Japanese bonds.
In Vienna, world powers and Iran say they are closer than ever to an accord after 11 days of high-level talks. An agreement would speed the country’s return to world oil markets and the international financial system.
“An Iran deal will add more pressure to the supply side at a time when demand is looking a bit uncertain,” said David Lennox, an analyst at Fat Prophets in Sydney. “It would not be good for the oil price.”
Iran’s plan to sell more crude remains a long way off, Goldman Sachs Group, Bank of America and Société Générale said last week. Its goal of boosting exports by 50 per cent would require an extra 500,000 barrels a day of production, which the banks predict will take six to 12 months as the nation revives ageing oil wells.
US crude inventories were probably unchanged last week after rising to 465.4 million barrels, based on the median forecast in a survey of nine analysts. A US energy information administration report comes out Wednesday n the subject. Supplies fell by 958,000 barrels, the industry-funded American Petroleum Institute reported on Tuesday.
European leaders set a Sunday deadline for Greece to accept a debt rescue, saying otherwise they would take the unprecedented step of tossing the country out of the euro zone. At a Brussels summit, Greece’s anti-austerity government was ordered to make new economic reform proposals that could earn it another aid package and head off financial ruin.
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