How is the Greek Debt Affecting Oil Prices?   

It’s no secret that Greece has been plagued by a colossal national debt for quite some time. However many people don’t realise that it isn’t just Greek citizens that are suffering the consequences of the nation’s liability. On Monday, oil prices fell for the second time following concerns over the aftermath of an emergency euro zone meeting addressing Greece’s debt crisis.

European Commission paints a pretty picture

While some oil investors are gravely concerned over how Greece’s debt will affect prices, the European Commission remains optimistic. An EC official recently tweeted that the nation’s latest proposal formed a "good basis for progress" and would benefit the continent as a whole.  

Uncertainty in the lead up to EC meeting

Regardless of how confident EC officials are, the fact remains that nothing is set in stone. At the end of the day prices will largely depend on the outcomes of major meetings, such as the emergency euro zone assembly. Ric Spooner, chief market analyst at Sydney's CMC Markets agrees, maintaining that "On a 24 hour basis we'll see some volatility depending on what happens with Greece."

What do the markets look like?

Negative outlooks are not unjust given the fact that Brent Crude scheduled for August delivery recently fell to US$62.88 a barrel. This represents a drop of 14 cents. In the previous session benchmark prices fell by US$1.24. As always, density continues to influence petroleum prices. This article on Density Measurement in the Petroleum Industry explains just how important the physical property is. 

Greece proposes reforms package

So what’s Greece doing to manage its debt and get itself out of the ‘black books’ of oil magnates across the globe? On Sunday Greek Prime Minister Alexis Tsipras put forward an optimistic new reforms package addressing foreign creditors. The package is part of the nation’s desperate bid to avoid a June default on its €1.6 billion debt repayments to the International Monetary Fund.

Overproduction + foreign loans = recipe for oil price plummet

As well as Greece’s colossal loans concerns over the USA’s high domestic petroleum production rates have also played a role in driving down oil prices. The States currently holds around 9.6 million barrels a day, a figure that tops any rate seen since the early 1970s. With new rigs recently rolled out in both the Permian and Bakken shale basins, concerns are only set to grow. Spooner is certainly not optimistic, revealing that his “expectation for a price increase is fairly limited." He adds, "One way or another we are likely to see some production cuts. If we did see prices go up then OPEC would increase production and/or U.S. producers would increase theirs as well."