Greece gets crude: Athens turmoil hits oil

Crude prices have fallen to their lowest in six months amidst mounting concerns over Greece leaving the euro. A sharper drop will follow, should Athens finally quit the monetary union, Dave Ernsberger, global director for oil at Platts, told Busines RT.

Prices will continue to head south, as Greece’s likely exit from the eurozone hasn’t yet been fully priced in by the markets, the Platts expert explained.“Brent being around $100/bbl or slightly higher is essentially predicated on the idea that European demand will be flat this year,” the experts said. The belief got firmer after Germany released its GDP growth figures on Tuesday, showing that the economy broadened 0.5% between January and March. The sound stats from Germany did inspire investors, but only temporarily, says Chris Weafer, chief economist at Troika Dialog.“The fact that the eurozone avoided falling into recession in the 1Q, albeit only because of the stronger than expected growth in Germany, allowed the price of Brent to halt its recent slide and rise by almost $1 p/bbl yesterday. However, that reprieve has already proven temporary and the latest Greece news has again undermined confidence and has cut Brent by $1.1 p/bbl in Asia trade this morning to $111.16 p/bbl.”The focus of investor attention is now shifting to demand from supply, Dave Ernsberger said. If during the first half of the year fears over possible disruptions of Iranian supplies kept prices high, “there’s been nothing new on that during a number of weeks now,” he added.The threat of falling world demand is now coming center-stage. A possible recession in western Europe, that accounts for 20% of the world’s oil demand, would drag commodity prices further down, Ernsberger told Business RT. “Additionally, it [Western Europe] is China’s single largest trading partner,” he added.Looking ahead, Ernsberger didn’t give any definite figure for future oil prices. He said, however, that tough times are ahead for the oil markets, as supply looks strong in the wake of weakening prospects for demand. “So, I expect the biggest pressure right about now or in the next month or so,” he said.However, despite falling crude prices, “oil remains one of the favorites for the investment community,” Ernsberger added.“There are a lot of instruments for an investor or a financial player that don’t show any kind of a return right now,” the expert concluded.