US benchmark West Texas Intermediate (WTI) for March delivery plunged by as much as 2.7 percent to $44.35 a barrel in New York, and Brent crude for March tumbled by up to 1.9 percent in London.
Both contracts regained some ground and in afternoon trade in Asia, WTI was trading at $45.02, down 57 cents, or 1.25 percent, and Brent was at $48.31, off 48 cents or 0.98 percent.
“Oil prices plunged just when they opened. We believe that the initial drop was sparked by the Greek elections,” said Daniel Ang, an investment analyst with Phillip Futures in Singapore.
“We even saw a glimpse of panic selling once the market opened. However, prices did rebound shortly after it dropped,” he told AFP.
The victory by the Syriza Party, whose anti-austerity policies have sparked fears Greece could exit the eurozone, sent the euro plunging to fresh 11-year lows against the US dollar.
Analysts say this makes dollar-priced oil more expensive, denting demand and adding further downward pressure on oil prices.
Syriza wants to renegotiate the terms of Greece’s 240-billion-euro bailout deal with the European Union and the International Monetary Fund which the party says is stifling any chance Greece has of economic recovery.
Singapore’s DBS Bank said “markets will be worried over the new government’s take on the reform agenda and austerity measures”.
Oil has lost more than half its value since June last year when the commodity was sitting at more than $100 a barrel due to a supply glut, boosted largely by robust US production, and weak global demand.
The Organization of the Petroleum Exporting Countries (OPEC), led by Saudi Arabia, last November decided to keep output levels despite the oversupply.
“Oil prices for the rest of the week is expected to move range-bound again,” Ang said. (AFP)