Crude oil futures declined Tuesday as rising Spanish and Italian bond yields overcame whatever optimism resulted from the Greek election.
Light sweet crude for July delivery declined 0.38 percent or 32 cents to $82.95 a barrel in electronic trading on the New York Mercantile Exchange during Asian trading hours. Brent crude oil futures for July delivery fell 0.16 percent or 15 cents to $5.90 a barrel on the ICE futures exchange in London.
Crude oil prices are under pressure as economic data slows
The outcome of the Greek elections failed to offer much relief for markets and risky assets as the euro zone debt crisis again loomed after Spain's cost of borrowing soared to fresh euro-era highs. With bond investors doubting if Europe's fifth-biggest economy will be able to service its expanding deb, 10-year Spanish government bond yields surged to 7.13 percent Monday, above the 7 percent rate at which Greece, Ireland and Portugal were forced to seek financial aid.
The latest data from the Bank of Spain showed that bad debts as a proportion of total lending were at their highest in 18 years in April and raised concerns that the recent 100 billion euro bank bailout may not be enough to rescue the country. Bad debts surged to 8.72 percent in April compared to 8.37 percent in March and 6.36 percent a year earlier.
On June 9, the group of finance ministers from the 17-nation single currency bloc agreed to lend Spain 100 billion euros to restructure its troubled banks. The figure was much higher than the International Monetary Fund's initial estimate of 40 billion euros. The aid will add up to 10 percentage points to Spain's debt ratio, and many analysts believe that with capital flowing out of Spain, the current aid is only a short-term fix and the country will eventually need a full state bailout.
In Greece, New Democracy party leader Antonis Samaras began talks with leaders of other political parties in an effort to form a pro-bailout government that will keep the Greeks inside the euro currency union. Samaras met the leaders of Pasok and the small Democratic Left group Monday. He also met Syriza leader Alexis Tsipras at the parliament in Athens, but Tspiras said that he would not join any coalition or national unity government.
"The most immediate issue that they will have to deal with is a potential renegotiation of the troika program. Germany has been sending mixed signals recently with regards the possibility of more favorable bailout terms, but we suspect this is largely due to political posturing and the market will be looking for clarity on that matter," said a note from Credit Agricole.
Light sweet crude for July delivery declined 0.9 percent and settled at $83.27 a barrel Monday.
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