Oil slides toward worst week on Greek woes

Oil prices fell on Friday, heading for their biggest weekly decline in six weeks as a dimmer economic outlook and the European debt crisis knocked US crude prices to their lowest in four months, testing a key support level.

US futures led losses, widening their discount to Brent by more than USD 1 to USD 19.50 a barrel. Oil failed to draw much support from a more than 1% slump in the dollar and a rise in stocks, with many analysts taking a grimmer view of the outlook for a resolution of Greece's debt woes.
Brent crude for August was trading down 96 cents at USD 113.06 a barrel, recouping some losses from the USD 111.05 mark it hit earlier in the session.
US crude futures for July , were down USD 1.88 at USD 93.07 a barrel, after retreating to USD 92.12 in early trade. US crude has fallen nearly 6% this week, dropping to its lowest since February, when war erupted in Libya, and paring this year's gains to less than 2%.
"US crude has broken below the recent range of USD 95-$105 and looks like it will shortly tack another USD 5 to the downside," said Gene McGillian, analyst at Tradition Energy.
US crude futures found some technical support at an early intra-day low of USD 92.12 low, just below the 200-day moving average of USD 92.22 a barrel.

GREEK DRAMA

Other markets rallied on signs of progress in Greece, with the embattled prime minister sacrificing his finance minister to force through an unpopular austerity plan, while Germany and France promised to go on funding Athens.
But for many oil traders it was still a glass half empty. Oil's slump broke its inverse correlation with the dollar, which has eased to its weakest since mid-April at just 22%, based on the average of the past 25 days.
"The fear of the falloff from the Greek debt crisis continues to impact the oil markets. Indications of a possible resolution of the crisis have helped pare some of oil's losses but investors worry about the stalling pace of US economic recovery," said McGillian.
An International Monetary Fund estimate cut in its estimate for US gross domestic product has also weighed on US crude prices. The IMF now projects an anemic 2.5% growth this year and 2.7% in 2012.
The IMF also warned that the United States and debt-ridden European countries are "playing with fire," unless they take immediate steps to cut their budget deficits.
Brent was also under pressure from news that this week's relative strength for the European benchmark was drawing physical crude from far afield, with news that traders were offering Russian Pacific Rim ESPO in the Mediterranean.
"A lot of crude oil is offered into the Mediterranean market because Brent is expensive," one source said.