Oil Prices Fall with Greek’s Inability to come up with a Deal to Stop Debt Default

Oil prices recently dropped as frustration with Greek policymakers’ inability to agree on a deal that will force additional budget cuts lowered demand for riskier assets. Stricter measures must be submitted by Greece in order to secure a highly needed bailout amounting to €130 billion from the IMF, EU and ECB and stop the country’s bankruptcy.

Policymakers of Greece were unable to decide on another set of stricter measures demanded by official lenders of the country as a provision of the subsequent financial assistance package.

Reports said that the government was given a deadline to provide an answer to the demands of Europe but was not able to meet it. Greek officials denied this claim.

Prime Minster Lucas Papademos and several ruling coalition leaders are prepared to restart negotiations soon.

The partners of Papademos oppose the suggested budget cuts cautioning that wage reductions and pensions may eventually cause social conflict.

However, in case additional aid is not given to Greece, there is a chance for it to go into default as early as March when its deadline of repaying the amount of €14.4 billion arrives.

Meanwhile, Rostam Ghasemi, the oil minister of Iran, recently said that his country may soon stop its oil supply to Europe as a response to EU’s imposed embargo. The sanction will start on July to give Europe sufficient time to look for other suppliers and avoid a sharp increase in oil prices.

Europe intends to gradually decrease its Iranian oil dependence and stop crude imports from the country that is allegedly developing nuclear weapons.

Iran previously made threats to decrease oil supplies but there was a delay on the proposal’s vote.

Reports also came out that China, the second biggest energy consumer worldwide is thinking of further decreasing its Iranian oil imports.

A report from Reuters said that sources in the oil industry of China expressed a possibility of another cut on Iranian imports beginning March. The imports have already been decreased by 285,000 barrels daily because of oil price disputes. China presently comprise one-fifth of the crude exports of Iran.

March delivery’s light-sweet crude prices dropped by $1.07 to reach $96.77 per barrel.

In the ICE Exchange, March Brent crude prices fell by 37 cents to reach $114.16 a barrel.

By Chris Termeer