Crude-oil futures fell 1.4% Monday to a fresh 2012 low below $95 a barrel amid mounting worries about the state of Greece's economy and rising global oil supplies.
Coalition leaders in Greece were working to piece together a deal aimed at avoiding default on current obligations, as warnings sounded that the country may exit the euro common-currency pact. Resurfacing economic turmoil in Europe boosted the dollar to its highest level against the euro since January and gave another reason for investors to avoid buying crude oil.
Sputtering economic signals in the world's major economies have pressured crude prices as supplies continue to grow. In the U.S., the world's biggest oil consumer, crude oil stocks stand at 22-year highs, while Saudi Arabia, the world's biggest oil exporter, is openly advocating lower prices and has opened the taps to 10 million barrels a day.
Traders said oil prices are heading for a critical juncture around $92.50 a barrel. A break of that level could clear the way for a run toward $85 a barrel, a level not touched since last October.
Light, sweet crude oil for June delivery on the New York Mercantile Exchange settled $1.35 lower, at $94.78 a barrel, the weakest level since Dec. 19, 2011. The contract has lost 10.7%, or $11.38 a barrel, with declines in eight of the past nine days.
ICE June Brent crude fell 69 cents to settle at $111.57 a barrel, the lowest level since Feb. 1.
"We are in slide mode," said Tom Bentz, director at BNP Paribas Prime Brokerage.
"It's all about Europe right now," he said, noting that economic news from China and the U.S. also hasn't been supportive for prices.
"A lot depends on how things shake out in Europe, but this market is on its heels, and where this stops isn't clear," Bentz said.
Money managers last week slashed their net long position in Nymex crude oil futures by 33%, adding further steam to the downtrend, traders said.
"We've seen a lot of liquidation by the specs," but the pressure for further declines may be easing after that strong selloff," said Gene McGillian, a broker and analyst at Tradition Energy in Stamford, Conn.
"The question is are people negative enough about the economy to get aggressively short with prices in the $90s," he said. Investors take short positions when they expect prices to fall. McGillian said a further crisis in Greece, such as a default, would be needed to push crude below $92.50 a barrel.
Saudi Arabia's Oil Minister Ali al-Naimi over the weekend repeated his desire to see benchmark Brent crude drop to near $100 a barrel.
"We need to get prices at a level around $100. Now, it is still high," he told reporters in Adelaide, Australia. ICE Brent futures have fallen $14.65, or 11%, since settling at $126.22 two months ago on concerns over supplies from Iran.
Brent would need to drop a further 10.4% to hit Naimi's target. Prices haven't settled below $100 since Oct. 4, 2011, when the were $99.79, which was an eight-month low.
Analysts expect U.S. crude oil inventories, already up 9.6%, or 33.2 million barrels, in the last seven weeks, to show a further 1 million barrel gain for the week ended May 11, when the Energy Information Administration releases its latest data at 10:30 a.m. EDT Wednesday. The data are also expected to show refineries boosted operations relative to capacity by 0.4 percentage point. Distillate stocks (diesel/heating oil) are expected to show a rise of 100,000 barrels, while gasoline stocks are expected to show a decline of 100,000 barrels, according to early expectations.
Reformulated gasoline blendstock futures for June delivery settled at the lowest level since Feb. 7, shedding 4.18 cents Monday, to $2.9590 a gallon. Gasoline has fallen 6.5 cents over the past three sessions.
June heating oil futures fell 3.41 cents to settle at $2.9295 a gallon, the lowest since Dec. 29, 2011. Heating oil has fallen 6.96 cents over the past three sessions.