NYMEX crude drops sharply in Asia as investors react to Greece vote

Investing.com - Crude prices dropped sharply in Asia on Monday as investors saw a downbeat effect on demand from the 'No' vote by Greece at the weekend on proposed bailout terms by international creditors, setting the stage for possible volatile financial markets.

Crude for August delivery dropped 1.22% at $54.84 a barrel in electronic trading on the New York Mercantile Exchange. There was no floor trading on friday because of the U.S. Independence Day holiday.

Asian policymakers in China and Japan and elsewhere braced for any fallout from the Greek 'No' vote at the weekend as Greece's Prime Minister, Alexis Tsipras said Sunday he wanted a quick deal with its creditors and to restore banking sector operations to avert a humanitarian crisis.

Tsipras said that the International Monetary Fund report, released Thursday, which said that the Greek debt was not sustainable, was proof that his government was right on the demand its restructuring.

Greece's Finance Minister, Yiannis Varoufakis, said Sunday that the 'No' vote in the referendum was the peoples' response to five years of austerity and added that creditors never had a real intention to cooperate.

"We had two requirements: to put an end to austerity and to restructure the debt," he said. "Unfortunately, the creditors refused any meaningful discussion and from the first moment planned to shut down our banks in order to impose their positions," he said to reporters.

"The Greek people today return this ultimatum back to the creditors. From tomorrow, with this No, we will extend a cooperation hand to our partners and call them one by one in order to reach common ground."

At the weekend, China announced the suspension of initial public offerings and corralled its leading brokerages to establish a RMB120 billion fund to support the country's battered stock market amid a flurry of weekend activity aimed at arresting the market's slide at the Monday open.

While the move is not a direct response to Greece, the move follows a near-30% plunge in the value of shares traded in Shanghai since its recent peak, including a 12% drop last week. Beijing has stepped up its interventions in the market after last weekend's rate and reserve cuts from the People's Bank of China failed to lift market sentiment and put a floor under prices.

Last week, oil prices fell in thin trade on Friday as an increase in the U.S. rig count added to fears over a global supply glut.

Brent crude for August delivery, the global benchmark, was down 2.44%, to settle at $60.56 a barrel on the ICE Futures exchange in London. The contract lost 4.65% for the week.

The drop in oil prices came after Baker Hughes (NYSE:NYSE:BHI) reported Thursday that the number of U.S. oil-drilling rigs rose by 12 to 640 last week, snapping 29 straight weeks of declines.

The rig count is seen by many investors as a proxy for activity in the oil industry.

The report came after data on Wednesday showing an unexpected increase in U.S. oil stockpiles in the previous week, on the back of increased production.

The U.S. Energy Information Administration said crude stockpiles rose by 2.4 million barrels in the week to June 26. The consensus forecast had been for a decrease of 2 million barrels. It was the first supply build since April.

At 465.4 million barrels, oil inventories remain near levels not seen for this time of year in at least the last 80 years.

Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.

Investors were also eyeing nuclear talks between the West and Iran, which could push millions of barrels of crude into the oversupplied world market.

The head of the International Atomic Energy Agency said Friday that Iran and the IAEA have worked out “some ways forward” to a deal which is expected to pave the way for the lifting of Western sanctions.

On Monday, Germany is to release data on factory orders. Switzerland is to publish a report on consumer inflation. Canada is to publish a report on the Ivey business index. In the U.S., the Institute of Supply Management is to release data on service sector activity.