Oil fell to around $63 a barrel on Friday as concern over Greece and a forecast that U.S. shale oil output would keep growing this year countered signs of a pickup in demand.
Greece has been less of a driver for oil than other markets such as equities, but analysts said the situation represented a bearish risk heading into the weekend. Euro zone leaders will hold an emergency summit on Monday to try to avert a Greek default.
Brent crude LCOc1 for August had dropped $1.21 to $63.05 as of 8.33 a.m. EDT, while U.S. crude for July CLc1 was down 99 cents at $59.46. Both contracts made gains on Thursday.
“Oil markets are not pricing much in terms of Greek risk but most of the European oil demand growth this year is coming from the southern countries,” said Olivier Jakob of Petromatrix in Zug, Switzerland.
“Therefore, if there was a Greek default and a contagion of a risk premium to other southern European countries it could have a negative impact on European oil demand.”
Saudi Arabian oil minister Ali al-Naimi said he was optimistic about the market in coming months, given increased demand and falling inventories, state media reported on Thursday. U.S. crude stocks declined in the latest week.
Despite stronger demand, supply is more than ample. There has been a buildup of North Sea and Nigerian crude cargoes, putting price differentials under pressure and sending them in some cases to multi-year lows.
Brent is down from $115 a year ago, in a drop that deepened after the Organization of the Petroleum Exporting Countries refused to prop up the market in the hope that lower prices would slow supply from higher-cost producers such as U.S. shale.