By Timothy Puko and Matthew Cowley
Oil prices fell toward three-month lows Monday on worries about
China's stock markets, a new flood of Iranian oil and the debt saga
in Greece.
Chinese stock markets have plunged in recent weeks, a
pessimistic sign for demand in the world's second-largest oil
consumer. A nuclear deal with Iran is also pushing forward, amid
signs Iran wants to export even more crude that previously
expected. And a "no" vote in Greece's referendum on Sunday has also
pushed investors into the dollar, which typically pushes oil prices
down.
The slate of concerns comes at just the moment when some feel
oil has gone past a tipping point. Oil slid to a two-month low late
last week as data showed U.S. producers had sent more drilling rigs
to work for the first time since December, damping hopes they had
started massive cutbacks that would reign in a world-wide
oversupply.
"All signs point south for oil prices," Capital Economics said
in its Monday note.
Light, sweet crude for August delivery continued its slide
Monday, down $2.63, or 4.6%, to $54.30 a barrel on the New York
Mercantile Exchange. Nymex is trading in an extended session that
includes limited holiday trading from Friday. U.S. oil is at its
lowest intraday price since April 15.
Brent, the global benchmark, fell $1.65, or 2.7%, to $58.67 a
barrel on ICE Futures Europe. Brent hit its lowest intraday price
since April 14.
Capital Economics lowered its year-end price forecast by more
than 8%, it said in its note. That puts U.S. oil at $50 a barrel to
end 2015 and Brent at $55.
Oil for two months had stabilized near $60, and its break away
from that area suggests a continuing slide ahead, said Mark
Waggoner, president of brokerage Excel Futures. It is likely to
slip just below $50 a barrel, the last area it stabilized in back
in February, he said. Iranian exports and the resilience of U.S.
producers makes it increasingly unlikely that bulls will see the
production declines they expected, Mr. Waggoner added.
"I still think production is going to increase," he said.
"There's a whole gambit" of bad news for oil prices Monday
morning.
The Chinese government over the weekend halted all new initial
public offerings and the central bank is expected to help investors
buy equities, according to The Wall Street Journal. The turmoil in
Chinese stocks is yet another sign of the wrenching economic
transformation that is under way in the Asian giant. For investors,
the concern is that the Chinese government may struggle to contain
the problems, broadly slowing growth and demand for oil along with
it.
The sudden slump in Chinese stocks "is a huge cause for concern
and as such can't be bullish for oil," said Tamas Vargas, an
analyst at PVM brokerage in London.
Negotiations between Iran and the west in talks over Iran's
nuclear ambitions are also due to be completed this week. The Wall
Street Journal reported Iran wants to double oil exports to 2.3
million barrels a day if a deal is reached and sanctions are
lifted.
The victory for the "no" vote in Greece's referendum on Sunday
has also prolonged the uncertainty in global crude-oil markets. The
WSJ Dollar Index is up 0.3% Monday, and, because oil is a
dollar-denominated commodity, a stronger dollar often drags prices
lower.
Bjarne Schieldrop, chief analyst for commodities at SEB Markets,
said investors shouldn't see the Greek vote as a buying
opportunity. It is outweighed by the possibilities of new Iranian
supply on the world market, he said.
"News of an Iran deal may come tomorrow and a final resolution
over Greece is likely to take longer," said Mr. Schieldrop. "Thus,
it looks risky to buy the Greek selloff today as news of an Iran
deal may arrive before a Greek resolution."
Gasoline futures fell 3.5% to $1.9636 a gallon. Diesel futures
fell 4.5% to $1.7570 a gallon.
Write to Timothy Puko at tim.puko@wsj.com and Matthew Cowley at
matthew.cowley@wsj.com
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