Oil falls back as concerns over euro zone remain
NEW YORK (Reuters) - Oil prices fell on Monday as pressure from the euro zone's wider debt crisis and fading expectations for coordinated central bank action erased early gains derived from the pro-bailout vote in Greece.
Spanish bond yields hit a new euro-era high above 7 percent, reminding investors the region's economic problems did not disappear because political parties in favor of Greece's bailout are in talks to form a government after a narrow victory over leftists who wanted to tear up the existing aid agreement.
German Chancellor Angela Merkel said on Monday that a new Greek government had to meet commitments made to international lenders. Speaking to reporters at a Group of 20 leaders' meeting in Mexico, Merkel said any loosening of agreed reform pledges would be unacceptable.
"The sell-off after the initial rally was because last week's strength was on the news that central banks would have a coordinated response to the Greece election and now the hope for more stimulus or liquidity has faded," said Phil Flynn, an analyst at Price Futures Group in Chicago.
The euro fell from a one-month high against the dollar and the strength of the U.S. currency also provided pressure on dollar-denominated oil prices.
A well supplied global market, after recent production hikes by Saudi Arabia that OPEC attempted to address at its policy meeting last week, continues to feed bearish sentiment.
But the tense negotiations between Iran and world powers, as they met in Moscow to address Tehran's disputed nuclear program, remained supportive to oil prices, limiting losses on Monday.
Brent August crude fell $1.50 to $96.11 a barrel by 12:08 p.m. EDT (1608 GMT), having traded to a one-week peak at $99.50 before retreating to a low of $95.38, the lowest since January 26 2011.
U.S. July crude was down 87 cents at $83.16, having dropped as low as $82.04 after reaching $85.60. The July contract expires on Wednesday.
(Additional reporting by Jessica Donati in London; Editing by Bob Burgdorfer)