On 18th June 2012, the prices on oil cut down on an uncertainty about Europe’s future after Greece managed to survive in an election that could keep it in the eurozone. However, the borrowing costs of Spain towered to a record high.
Light sweet crude was down 76 cents at $83.27 a barrel for delivery in July according to the New York’s main contract. Brent North Sea crude in London trade dropped $ 1.56 at $ 96.05 a barrel for delivery in August.
The market was reassured that Greek election on 17th June 2012 has created the potential for the country to remain in the single-currency bloc, but attention promptly turned to Spain’s increasing problems, Andy Lipow at Lipow Oil Associates said.
On 18th June 2012, Spain’s borrowing costs topped 7.0 per cent in its 10 years bonds, which were the highest level since the birth of the euro in 1999. Some of the oil traders were worried that Spain will be the next eurozone country, which will require an international bailout after Greece, Portugal and Ireland.
Lipow said: “The market now wants to see what European countries will do to address the whole situation in the eurozone.”
Eugen Weinberg, Commerzbank analyst said: “Europe’s sovereign-debt crisis will continue to worry the market for a long time yet, which could prevent any significant increase in commodity prices.”
Oil traders were tensed about a two-day meeting that began on 18th June 2012 in Moscow between world powers and Iran over its contested nuclear program. However, the talks between the so-called P5+1 group and Iran failed to move any closer to a breakthrough in the standoff over the Iranian nuclear program.
Addison Armstrong at Tradition Energy said: “Expectations are not very high for a breakthrough at this meeting and a negative result will likely re-inject some geopolitical risk premium into the oil markets.”
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