Oil Retreats on Doubts About Greek Deal

NEW YORK (DTN) -- New York Mercantile Exchange oil futures were lower at the open of regular trade Monday morning on fresh doubts a last-minute deal would be reached to end the ongoing Greek debt drama and avert an exit by Greece from the eurozone trade block.

Within the past hour, a euro-zone official said the market has been too optimistic about a deal being consummated than it should have been. The initial optimism was based on an earlier report that a deal was near, but the official said Greece made its proposal known too late and the creditors will now wait several days before making a decision on whether to extend more loans to Athens.

A summit of 19 eurozone finance ministers reportedly ended with recrimination Monday.

Although details weren’t released, reports said Athens acquiesced to some of the creditors' demands, proposing to raises taxes and do away with early retirement while cutting spending in the Greek budget, according to reports. With the situation in Greece getting worse, the European Central Bank raised the amount of emergency loans to Greek banks to offset massive withdrawals by Greek depositors.

At 8 a.m. CDT, NYMEX July WTI crude futures opened down 1 cent at $59.60 bbl after inside trade, and ahead of the contract’s expiration Monday afternoon. The August WTI contract opened down a penny at $59.96 bbl.

ICE August Brent futures opened 4 cents higher at $63.06 bbl after inside trade, with spot-month Brent opening at a $3.43 bbl premium to spot-month WTI futures.

In products trade, NYMEX July ULSD futures eased 0.19 cents to a $1.8650 bbl open, and since traded to a two-week low of $1.8501. The NYMEX July RBOB futures contract slid 1.90 cents to $2.0396 at the open, moving off a $2.0170 two-week low.

On Wall Street, U.S. equities remained higher but pared overnight gains, as investors continue to monitor news from Europe about Greece.

Germany downplayed concessions made by Athens, with Chancellor Angela Merkel saying any agreement could take days to reach and Finance Minister Wolfgang Schaeuble said there was nothing new from Athens. Greece faces a $1.8 billion loan payment to the International Monetary Fund on June 30, which it probably cannot make without help from its creditors.

The oil futures complex has been volatile in recent days not only on Greece but also on the global and domestic supply and demand disposition. The Energy Information Administration said last week that U.S. output declined 20,000 bpd during the week ended June 12 while total crude oil stocks fell 2.7 million bbl and gasoline stocks unexpectedly increased 460,000 bbl as demand for the fuel declined 424,000 bpd.

Overseas, Saudi Arabian Oil Minister Ali al-Naimi last week said the kingdom would produce more oil in the coming months to meet any incremental demand. That comment revived concerns about high oil production by the Organization of Petroleum Exporting Countries. OPEC is producing 1.5 million bpd above its agreed ceiling of 30 million bpd.

Saudi oil production increased by 25,000 bpd in May to a record 10.33 million bpd, as the kingdom continued its strategy of keeping oil flowing to maintain market share and make it economically difficult for high cost U.S. oil shale producers to continue operating.

The market is also expected to focus this week on a potential nuclear deal with Iran, with a deadline for a deal to be reached set for June 30. A deal could lead to more oil supply in the market because there are sanctions on how much Iran is now allowed to export, with an agreement being reached bearish for oil prices.

George Orwel can be reached at george.orwel@telventdtn.com