Oil prices plunged to a two-month low on Monday July 6th, as traders fretted over whether the fallout from Greek turmoil and slowing Chinese economy could crimp energy demand.
West Texas Intermediate (WTI), a benchmark for U.S. crude oil prices, was trading down 4.7% to $54.25 a barrel on the New York Mercantile Exchange as of 11:30 a.m. E.T. North Sea Brent Crude was also trading lower, down 3.2% to $58.89 per barrel.
The so-called victor for the “No” vote in Greece’s referendum on Sunday has not provided a clear direction in global crude oil markets. The result added to the uncertainties surrounding the fate of the Greece and whether or not the country could remain in the eurozone.
Currency fluctuations were a further drag on oil prices. The Greek debt crisis sent investors fleeing into safe-haven assets like U.S. Treasuries bonds. This pushed up the value of U.S. dollars, making it more expensive for foreign buyers to purchase the dollar-denominated crude.
On the other side of the globe, Chinese equity prices tumbled more than five percent during the trading session, in spite of action by the country’s central bank to stabilize financial markets. Traders are worried that turmoil in the Chinese stock market could have ripple effects throughout the entire economy, slowing oil demand in the world’s second-largest economy.
Looking forward, investors will be watching to see whether Iran and the U.S. can reach an agreement on nuclear talks between the two countries. If a deal is announced and sanctions are lifted, Iran intends to double its oil export to the already oversupplied oil market.