Oil prices fell on Monday as the Greek debt crisis boosted the dollar, making fuel more expensive to holders of other currencies, and as United Nations talks offered a chance for peace in Yemen, where crude exporter Saudi Arabia is involved in a civil war.
Brent crude oil dropped by $1.63 to a low of $62.24 a barrel before recovering to trade around $62.65, down $1.22, by 10 a.m. EDT. U.S. light crude oil, also known as West Texas Intermediate (WTI), fell to a low of $58.73 before rallying to $59.16, down 80 cents.
U.N. Chief Ban Ki-moon launched Yemen peace talks in Geneva on Monday with a call for a humanitarian truce after warplanes from a Saudi-led Arab coalition pounded the capital, Sanaa.
Investors are increasingly concerned about surplus supply in the global oil market with the Organization of the Petroleum Exporting Countries (OPEC) pumping about 2 million barrels per day (bpd) more than needed, according to most industry estimates.
Production has been rising in top OPEC exporters Saudi Arabia and Iraq, and a deal with Iran over its nuclear program may soon lift sanctions on the Islamic Republic, allowing it to increase oil exports.
Brent came under additional pressure ahead of the expiry of the front futures contract for July at the close on Monday. The spread between Brent and WTI narrowed to as little as $3.24 a barrel, from about $7 a month ago and more than $8 in April.
Brent has fallen from a high above $66 last week and appeared to be settling in a range between $60 and $65, said Carsten Fritsch, senior oil and commodities analyst at Commerzbank in Frankfurt.