Oil prices drop as Grexit prospect grows
Oil prices have plunged amid concerns that Greece may have to leave the eurozone after Greeks delivered a resounding ‘No’ to the conditions of a rescue package for the debt-ridden country.
On Monday, the crude oil market was pushed low with Brent North Sea crude oil for delivery in August dropping USD 1.98 to USD 58.34 a barrel in London trading, compared with the closing level on Friday.
West Texas Intermediate for delivery in August plummeted USD 2.79 to USD 54.14 a barrel compared with Thursday's closing level.
"Commodity markets have largely responded in the ways we had anticipated to the growing risks of Grexit," said analyst Julian Jessop at research house Capital Economics.
In a hastily organized referendum on how the Greek government should deal with the rising demands of its international creditors for granting a bailout, more than 61 percent of the people on Sunday said ‘No’ to the conditions set by the lenders, ostensibly improving the ruling Syriza party’s position in ongoing negotiations with the international creditors.
"The result of the Greek referendum has thrust the world into uncharted territory," Singapore's DBS Bank said in a market commentary.
Stock markets also started on a negative note with European bourses taking the heaviest hits due to the Greeks’ vote of ‘No’ to the new harsh bailout terms.
Reports said that the Euro Stoxx 50, a stock index of the eurozone, dropped 2.22 percent, while the CAC 40, the benchmark French stock market index, sank 2.01 percent and Frankfurt's DAX 30, a German stock index, fell 1.52 percent.
The FTSE 100, a stock market index in London, lost 0.76 percent and New York’s Dow Jones Industrial average shed 0.26 percent.
Greeks had to choose whether to accept another tough austerity package proposed by the country’s international lenders – the European Commission, the European Central Bank and the International Monetary Fund – in return for fresh bailout loans.
Athens received two bailout packages in 2010 and 2012 worth a total of €240 billion ($272 billion) from its creditors following its 2009 economic crisis. In return for the bailouts, Athens undertook to implement harsh austerity measures, which sparked public outcry.
IA/MHB/AS
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