Oil Prices Shaken by Greek Debt Crisis


NEW YORK ( TheStreet) -- Oil prices tumbled upon more uncertainty about Greece's debt situation, despite signals from Germany that it is open to a compromise to aid Greece.

Brent crude oil for August delivery finished down 81 cents at $113.21 a barrel and West Texas Intermediate light sweet crude oil for July delivery fell 2 cents to $92.99.

"Even though the funding for Greece for July now seems secured with pledges of funding from both the European Union and International Monetary Fund, the funding beyond that point is still open," said Bjarne Schieldrop, SEB Commodity Research's chief commodities analyst, in a note.

Former Federal Reserve Chairman Alan Greenspan told journalist Charlie Rose in an interview with Bloomberg TV Friday that a Greek default was highly likely, and it could help drive the U.S. economy into a recession.

The IMF on Friday published a report that said global economic expansion is mildly slowing temporarily, with growth in many advanced economies still weak. Overall, the global economy expanded at an annualized rate of 4.3% in the first quarter, and forecasts for 2011 to 2012 are generally unchanged, the IMF said.

"Greater-than-anticipated weakness in U.S. activity and renewed financial volatility from concerns about the depth of fiscal challenges in the euro area periphery pose greater downside risk," the IMF said.

The report noted that growth in most emerging and developing economies continues to be strong.

On Thursday, the International Energy Agency (IEA) raised its global oil demand forecast by 100,000 barrels a day, on average, for 2010 and 2011.

The IEA also mentioned that there are indications OPEC constituents will increase production.

Despite the deadlock over boosting oil production quotas at a June 8 meeting among OPEC members, reports indicate that Saudi Arabia plans to raise output to 10 million barrels a day from 8.8 million barrels in May.

"Saudi Arabia seems to be determined to show the non-cooperating members in OPEC, especially Iran, that it is Saudi Arabia who calls the shots in OPEC. Quickly after the latest OPEC meeting, Saudi Aramco contacted refineries in Asia and Europe offering more oil," says Schieldrop.

The analyst suggests closing out of long positions ahead of the weekend and holds a bearish view of the commodity.

Oil services companies were trading mixed. Halliburton ( HAL) was up 0.3% to $46.53, Schlumberger ( SLB) was higher by 0.2% at $82.45, Baker Hughes ( BHI) was down 0.3% to $69.63, Newpark Resources ( NR) was adding 1% to $8.15, Tesco ( TESO) was lower by 0.9% at $17.44, Flotek Industries ( FTK) was rising 0.9% to $7.71 and Weatherford International ( WFT) was losing 1.1% at $16.91.

-- Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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