Oil prices tumble after Greek no vote to bailout

Oil prices tumble after Greek no vote to bailout, China stock market turmoil
oil prices fell sharply in early trading on Monday after Greece rejected austerity measures demanded in return for bailout money and as China rolled out an unprecedented series of steps over the weekend to prevent a full-blown stock market crash.

In a referendum on Sunday, Greeks overwhelmingly rejected austerity measures demanded in return for bailout money, putting in doubt its continued place in the single currency and pulling down the euro in early trading on Monday.

In China, stock markets face a make-or-break week after officials rolled out a series of measures to prevent a full-blown stock market crash that would threaten the world's second-largest economy.

Both U.S. and internationally traded Brent futures were down over 1 percent, trading at $55.08 and $59.72 per barrel respectively at 0035 GMT.

The falls meant that both crude futures were at their lowest level since mid-April.

"Uncertainty over Greece is bearish for oil. It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in U.S. drilling rigs, and a potential increase in Iranian oil supply," said Olivier Jakob, senior energy markets analyst at Petromatrix in Zug, Switzerland.

"The main implication is for euro/dollar and I think it will put additional pressure on the euro," he added.

A strong dollar puts pressure on oil markets as it makes dollar-traded fuel more expensive for countries using different currencies.

The euro slid more than 1 percent against the dollar and European stock and bond markets were poised to take a sharp hit with the resumption of trade on Monday, stunned European leaders called a summit for Tuesday to discuss their next move.

In China, brokerages and fund managers agreed to buy massive amounts of stocks to support markets which saw 30 percent falls since June, helped by China's state-backed margin finance company which in turn would be aided by a direct line of liquidity from the central bank.

China has also orchestrated a halt to new share issues, with dozens of firms scrapping their IPO plans in separate but similarly worded statements over the weekend, in a tactic authorities have used before to support markets.

Adding to the bearish mindset for oil, U.S. drilling increased for the first time after 29 weeks of declines, data showed on Thursday, the strongest sign yet that higher crude prices are coaxing producers back to the well pad.

Production in Russia and the Organization of the Petroleum Exporting Countries (OPEC) is also at near records.

Gold gets safe-haven boost after Greeks reject bailout terms

Safe-haven bids pushed up gold prices on Monday after Greeks rejected terms of a bailout package, bringing more uncertainty over Athens' financial situation and its future in the euro zone.

Spot gold rose 0.3 percent to $1,170.61 an ounce by 0044 GMT, after earlier jumping as much as 0.6 percent.

U.S. gold climbed nearly 1 percent in its biggest daily gain in about two weeks to $1,174.40 before paring some gains.

In a referendum on Sunday, Greeks overwhelmingly rejected conditions of a rescue package from creditors. Official figures showed 61 percent of Greeks had rejected a deal that would have imposed more austerity measures on an already ravaged economy.

The vote leaves Greece in uncharted waters: risking a banking collapse that could force it out of the euro. Without more emergency funding from the European Central Bank, Greece's banks could run out of cash within days. That might force the government to issue another currency to pay pensions and wages.

Gold, typically seen as an alternative investment during times of financial and economic uncertainties, rallied as the euro slumped and U.S. equity futures fell on risk-averse sentiment in the market. Other safe havens such as the yen also rallied.

While early price actions have been choppy, dealers emphasized that markets were orderly with no signs of financial strain and expectations were high that the European Central Bank would step in early with a pledge of extra liquidity. The Japanese government said it was ready to respond as needed in markets and was in close touch with other nations.

In other news from the gold industry, the Reserve Bank of India and the finance ministry are in talks to scrap bulk import licences for a gold-silver alloy used by domestic refiners, months after relaxing curbs on gold imports, officials with direct knowledge of the talks said.

Gold prices in major consumer India were quoted at deep discounts to the global benchmark this week on tepid demand and adequate levels of inventory, dealers said.