August Crude Oil futures finished lower last week for a number of reasons. The market started the week under pressure and never looked back. The catalyst at the start of the week was the uncertainty about the financial crisis in Greece. The initial reaction by investors was not caused by the usual supply and demand factors per se, but by investors moving money out of risky assets.
On Monday, the Greek government confirmed it wouldn’t be able to make its monthly loan repayment to the International Monetary Fund by the deadline on Tuesday, June 30. This action moved Greece closer to an exit from the Euro Zone.
Greek leaving the Euro Zone would cast a pall over the oil markets. The move would strengthen the U.S. dollar, making the dollar-denominated commodity more expensive for foreign buyers. This would hurt demand while driving down imports and fueling a rise in inventories.
There is also speculation that the Greek crisis could trigger an economic slowdown in Europe. This would also reduce demand from an economy that is struggling to gain some traction just four months after the European Central Bank started its stimulus program.
Also helping to drive the market lower were concerns about the Iran nuclear deal. A deal between Iran and the major western nations would put an end to the sanctions against the country. This would open the door to badly needed foreign investment. An influx of funds would likely be used by Iran to buy oil equipment to…