NEW YORK (Reuters) - Oil prices fell on Monday as Greece’s inability to form a coalition government and concerns about a slowing Chinese economy fed worries about the outlook for petroleum demand.
Greece’s turmoil triggered selling in dollar-denominated copper and gold, sending a benchmark commodities index to a 19-month low, while pressuring the euro to a four-month low against the dollar and weighing on the stock market.
Hedge funds and large speculators made the biggest-ever cuts in their net long U.S. crude futures and options positions in the week to May 8, according to government data released on Friday, adding to this week’s bearish sentiment.
Crude futures extended losses that, in the two weeks ending on Friday, left Brent crude down 6.2 percent and U.S. crude off 8.4 percent.
“The situation in Greece, hitting the euro, comes after last week’s China data showing growth is slowing and the trading losses by JPMorgan have hurt confidence,” said Phil Flynn, analyst at PFGBest Research in Chicago.
Brent crude fell 69 cents to settle at $111.57 a barrel, having slumped to $110.04, the lowest intraday price since last falling below the $110 level on January 25.
The front-month Brent June contract expires on Wednesday.
U.S. crude fell $1.35 to settle at $94.78, having slipped to $93.65, a 2012 low and weakest intraday price since December 19. Prices remained below the 200-day average after closing below that level on Friday.
Brent’s premium to U.S. crude increased to $16.79 a barrel, based on settlements, ahead of this week’s planned reversal of the Seaway crude pipeline. The reversal will allow stockpiles bottlenecked in the U.S. Midwest to be sent to the refinery-rich Gulf Coast.
Brent’s total trading volume was 13 percent above the 30-day average and outpaced turnover for U.S. crude, which lagged its 30-day average by 17 percent.
Brent and U.S. crude, heating oil and gasoline futures all have relative strength index (RSI) readings below 30 after the recent price slide. A reading below 30 suggests an oversold condition to investors who follow technical indicators.
China’s central bank cut the banks reserve requirement on Saturday in an attempt to loosen lending and head-off the risk of a sudden slowdown in the world’s second-largest economy.
The reserve cut came after oil ended last week under pressure from data showing China’s industrial production in April grew at its slowest pace in nearly three years.
A governing coalition in Greece remained elusive after the inconclusive election May 6 and new elections looked increasingly likely, prompting European Union policymakers to warn Athens it cannot remain in the euro zone if it tore up bailout program agreements.
Opinion polls show that anti-bailout parties would probably post the strongest result in another election, seen as increasingly likely to be held next month.
The euro’s tumble amid this euro zone turmoil added to the strength of the dollar index .DXY. A stronger U.S. currency can pressure dollar-denominated commodities by making them more expensive for consumers using other currencies.
Saudi Arabia wants a Brent price of around $100 a barrel and would like to see global inventories rise before demand picks up in the second half of the year, the kingdom’s Oil Minister Ali al-Naimi said on Sunday.
U.S. crude inventories were expected to have risen for an eighth straight time last week, a Reuters analyst survey on Monday showed. Distillate stocks were seen unchanged and gasoline stocks slightly higher.
Higher production from Saudi Arabia, Libya and Iraq has helped cushion global supply as U.S. and EU sanctions continue to limit Iran’s exports ahead of an EU embargo on Iranian barrels set for July.
Iran’s chief nuclear negotiator warned Western powers on Sunday that applying pressure on Tehran could jeopardize talks on its nuclear program, state television reported.
Additional reporting by Gene Ramos in New Yor, Simon Falush in London and Jessica Jaganathan in Singapore; Editing by Marguerita Choy, David Gregorio and Alden Bentley