Investing.com - Crude oil futures tumbled sharply on Monday, as traders awaited developments surrounding ongoing nuclear talks between the West and Iran, which could push millions of barrels of crude into the oversupplied world market.
According to media reports, Iran and six world powers neared a long-awaited nuclear deal that would end sanctions on Tehran in exchange for curbs on the country's disputed nuclear program.
A deal is viewed as bearish for crude prices, as Iran reportedly hoards 30 million barrels of oil in its reserves ready for export.
An outflow of Iranian oil could depress crude prices in a global market already oversaturated by a glut of oversupply.
On the ICE Futures Exchange in London, Brent oil for September delivery plunged $1.42, or 2.42%, to trade at $57.58 a barrel during European morning hours.
Elsewhere, on the New York Mercantile Exchange, crude oil for August delivery lost $1.11, or 2.1%, to trade at $51.63 a barrel.
The spread between the Brent and the WTI crude contracts stood at $5.95 a barrel, compared to $6.26 by close of trade on Friday.
Market sentiment recovered as marathon overnight negotiations on a bailout deal for Greece hammered out an agreement to prevent a financial collapse and an exit from the euro area. The details of the agreement were to be announced a press conference later in the day.
European Council President Donald Tusk said early Monday that a program for Greece was "all ready to go", "with serious reforms and financial support".
The Greek parliament must pass new legislation on Monday and Tuesday to implement the measures agreed in Brussels, including on pensions reform and a new sales tax regime. Parliaments in several euro zone countries will also have to approve any new bailout.
Eurogroup President Jeroen Dijsselbloem said talks on bridge financing for Greece will begin immediately, to help cover its debt repayments this summer. He also said that €50 billion of state owned Greek assets would be set aside in a fund to contribute to the recapitalization of Greek banks.
The euro jumped on the news, hitting highs of 1.1197, before turning lower, while the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 96.53, up 0.6% for the day.
The greenback remained supported after Federal Reserve Chair Janet Yellen said in a speech Friday that the central bank is on track to raise interest rates at some point this year. The comments from Yellen are her most definitive to date on the timing of a 2015 rate hike.
Fed Chair Yellen appears before the House Financial Services Committee on Wednesday. Her testimony will be closely watched for further clues on when U.S. interest rates may start to rise.
Elsewhere, Chinese trade data released earlier showed that the country’s trade surplus narrowed to $46.5 billion last month from $59.5 billion in May, compared to estimates for a surplus of $55.7 billion.
Chinese exports rose 2.8% from a year earlier, beating forecasts for a decline of 0.2%, while imports fell 6.1%, better than expectations for a drop of 15.0%.
A slowdown in domestic demand indicated a recovery in the broader economy remains fragile and may need further government stimulus.
China is scheduled to release data on second-quarter gross domestic product on Wednesday. The report is expected to show the world's second largest economy grew 6.9%, slowing from 7.0% in the preceding quarter.
China is the world's second largest oil consumer after the U.S. and has been the engine of strengthening demand.
Global oil production is outpacing demand following a boom in U.S. shale oil production and after a decision by the Organization of Petroleum Exporting Countries last year not to cut production.
The International Energy Agency on Friday forecast weaker global oil demand next year and warned that prices are set to come under further pressure from an expanding glut of crude.
OPEC will publish its own monthly assessment of oil markets later in the session.