GREECE MOVING DOWN

Oil prices fell on Monday, with U.S. crude dipping below $59 per barrel to an almost three-week low, after Greece imposed capital controls as lenders refused to extend the country's bailout.

Financial markets weakened across the board, with the euro dropping to its lowest in almost a month and share prices in Asia tumbling, amid worries of cash-strapped Greece being forced out of the euro zone.

"As far as the oil market is concerned, the potential ramifications are downward," said Ric Spooner, chief market analyst at Sydney's CMC Markets. "If the situation drags out then that will be a dent to confidence for investors."

Brent crude LCOc1 was down 79 cents at $62.47 a barrel by 0505 GMT, after rising 6 cents to $63.26 a barrel on Friday.

U.S. crude CLc1 was down 85 cents at $58.78 a barrel. It reached $58.63 earlier, the lowest since June 9. The benchmark closed down 7 cents on Friday at $59.63.

Oil investors are also monitoring negotiations on Iran's disputed nuclear program going on in Vienna, Spooner said.

Iran is backtracking from an interim nuclear agreement with world powers three months ago, Western officials suggested on Sunday, as U.S. and Iranian officials said talks on a final accord would likely run past a June 30 deadline.

"The deadline is likely to be extended so that makes it a little less at the cutting edge of thinking right now," Spooner said. "But we have rallied a fair way so the market is a bit vulnerable to increases in supply."

Securing an agreement would end a nuclear standoff between Iran and the West that could eventually lead to suspending sanctions and allow Tehran to raise crude exports, adding to an already well-supplied world market.

"The surplus in the market isn't going to clear terribly quickly. Indeed, it could be somewhere in the middle of 2016 till we start eating into inventories on a global basis so we're relatively cautious in terms of upside," said David Fyfe, head of market research & analysis at Gunvor Group.

"On the flip side, at $60, a lot of people are stopping developing new projects, there's maybe a million barrels a day (of oil) by 2017 that's not going to be there. So at some stage, there's going to be rebound in prices when some of these project deferrals start having an impact on the market," Fyfe added.

reuters.com