Brent turned negative and U.S. crude extended losses Monday after a downgrade of Greece's credit rating fed jitters about the economy and oil demand.
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Standard & Poor's Ratings Services lowered its long-term sovereign credit ratings on Greece and put the outlook at negative, also causing the U.S. stock market to briefly turn lower and causing the euro to pare gains against the dollar.
Oil's reversal came after Brent crude jumped to a five-week peak above $120 a barrel, pushing its premium to U.S. benchmark crude to a record above $21 a barrel, as a force majeure in Nigeria further strained a tight European market.
``The S&P downgrade of Greece sparked the pullback and the stock market also moved lower,'' said Chris Dillman, analyst at Tradition Energy in Stamford, Connecticut.
Brent crude for July delivery fell 88 cents to $117.90 a barrel by 1:36 p.m. EDT (1736 GMT), pulling back from its earlier $120.25 intraday peak. U.S. July crude fell $2.63 to $96.66 barrel, having slumped as low as $96.13.
Worries about slower economic growth had already pressured U.S. crude even before the news on Greece. Ample domestic inventories, especially at the Cushing, Oklahoma, oil hub, also weighed on U.S. crude prices. Brent's premium to U.S. crude has been lifted by bullish factors that include Libya's prolonged outage to limited supplies of North Sea benchmark Forties crude.
A fresh catalyst emerged on Monday when Royal Dutch Shell declared force majeure on its Nigerian Bonny Light crude oil loadings for June and July. Shell blamed production cutbacks caused by leaks and fires on its Trans-Niger Pipeline.