U.S. crude sank for a second straight day on Tuesday as a near-bankrupt Greece and China's stock market losses sparked an investor flight to safe havens, with technical selling threatening to push oil further into a bear market.
Also weighing on crude prices was Iran's determination to seal a nuclear deal with global powers to bring more supply to the market and the restart of a key oil terminal in Libya.
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It was down 55 cents at $51.98 per barrel by 1:45 p.m. EDT, after sliding almost $2 at the session low.
"There has been a lot of money looking to pile into the short-side, and there have been an accumulation of different triggers to cue that over a short time," said Paul Horsnell, head of commodities research at Standard Chartered in London. "Some were looking at Iran; for some it is macro spillovers from Greece or China; for others it's a pure dollar play, and for others the rise in U.S. rig counts."
"None of those work in isolation, but put them all together in a short period and they'll do it. And after that, the technicals kick in to give a further push down."
U.S. crude is teetering toward a bear market technically, with its 17 percent drop since its May high of $62.58 being precariously close to the 20 percent selloff required from the last major peak to constitute a bear market.
More downside momentum could push U.S. crude to test the six-year low of $42.03 set in mid-March, technical analysts said.
Investors fled to the relative safety of the dollar and U.S. bonds as banks in Greece ran down to their last few days of cash after Greeks voted in a referendum to reject an international bailout. The dollar hit a five-week high, weakening demand for dolllar-denominated commodities from users of other currencies. [FRX/]
Chinese equities, meanwhile, extended their hemorrhage, ignoring a slew of support measures from Beijing.
"The U.S. dollar and Treasuries are what people are buying right now," said David Thomson, executive vice-president at Powerhouse, an energy-specialized commodities broker in Washington.
(Additional reporting by Christopher Johnson in London and Henning Gloystein in Singapore; Editing by Marguerita Choy, Peter Galloway and Andrew Hay)