FX:Crude oil eases down as Greece concerns counter Iran fears
Forexpros – Crude oil futures were modestly lower on Tuesday, after European finance ministers rejected a proposal by Greece’s creditors, fuelling fears over a possible default, but prices continued to draw support from a disruption to Iranian oil exports.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in March traded at USD99.47 a barrel during European morning trade, shedding 0.1%.
It earlier fell by as much as 0.25% to trade at a daily low of USD99.41 a barrel.
At a meeting in Brussels on Monday, European finance ministers rejected bondholders' demands for an interest rate of 4% on new, longer-dated bonds that are expected to be issued in exchange for their existing Greek holdings.
Greece stated that it was not prepared to pay an interest rate of more than 3.5%, and euro zone finance ministers as well as the International Monetary Fund backed the Greek government's position.
Olli Rehn, the European Commissioner for Economic and Monetary Affairs, said he expected a deal on the debt swap to be struck "within days".
An agreement is necessary if Greece is to get the next tranche of bailout funds that would prevent a devastating debt default. Greece does not have enough money to cover a EUR14.5 billion bond repayment due March 20.
Oil prices continued to draw support from ongoing tensions between Iran and the West after the Islamic Republic again threatened to block shipments of crude from the Persian Gulf.
The latest threat followed Monday’s decision by the European Union to embargo imports of Iranian oil in an effort to get the Iranian authorities to scale back its nuclear program.
The ban was set to take effect on July 1, following a review to ensure the weaker EU economies can find, and afford, new sources of oil.
The EU currently buys around 20% of Iran's oil exports with Greece, Spain and Italy the top buyers. Iran is the world's fourth largest oil producer, pumping nearly 5% of the world's oil in 2010.
The threat of a major supply disruption from the country has helped support oil prices in recent weeks.
In a report released earlier, German-based financial service provider Commerzbank said, "We have supporting factors like geopolitical risk regarding Iran and the downside risk from the euro zone debt crisis. Depending on which has the upper hand, oil prices are going up or down."
Elsewhere, on the ICE Futures Exchange, Brent oil futures for March delivery declined 0.2% to trade at USD110.36 a barrel, with the spread between the Brent and crude contracts standing at USD10.89 a barrel.
