NYMEX June crude settled 55 cents lower at $97.94/barrel Monday after dipping to its lowest level in more than four months.
The selloff is a continuation of one that started late last week as eurozone debt worries moved to the forefront again.
June crude fell as low as $95.34/barrel -- a level not seen since December 20, 2011 -- after weekend elections in France and Greece showed voter impatience with austerity measures that have yet to translate into economic improvement.
ICE June Brent settled 2 cents lower at $113.16/b after falling to a $110.34/b.
NYMEX June heating oil settled 2.74 cents lower at $2.9814/gal, while June RBOB settled 17 points lower at $2.9741/b.
Bill O'Grady, chief market strategist at Confluence Investment Management, said the possibility remains that this year will see the third straight summer with a eurozone debit crisis.
"There has been a huge push back on austerity ... the bond market won't take it well and oil is finally succumbing to those concerns," O'Grady said, however, he noted that as investors "calmed down" throughout the session crude futures did pared some losses on the day.
"On the other hand we had a very established range between $100 and $106 and now that we have blown through that, it suggests that we are in for more weakness," O'Grady said, noting that US growth was also looking a little soft.
Energy analyst Tim Evans of Citi Futures Perspective said a nervous equity market and weakness in the euro led to risk-off selling into the oil market, with NYMEX crude bearing the brunt of the speculative long liquidation.
Carl Larry of Oil Outlook said there still was a "parade of speculators" moving out of the NYMEX crude contract ahead of an anticipated margin change by CME Group, which was delayed 90 days.
"We are not seeing a lot of fundamentals causing the market to push so much lower," Larry said. "Yes, the [US] jobs number on Friday was weak, but we have not proved enough on the demand side to warrant this major selloff."
However, open interest in NYMEX crude futures has been moved steadily higher since May 1, during a time when prices have fallen, with some market players attributing the price moves to speculators exiting NYMEX crude.
BNP Paribas broker Tom Bentz said the decline in crude was follow-through from last week's major breakdown, and the elections in Greece and France renewed uncertainty over the eurozone debt crisis.
"The euro got hit hard initially this morning...along with petroleum markets and other risk assets as demand worries return," Bentz said, also noting the Commitment of Traders report from the Commodity Futures Trading Commission Friday, which showed that non-commercial traders in NYMEX crude were increasing their net long positions as of last Tuesday's close, just before markets reversed.
"Therefore, likely speculative length was being liquidated over last few days," Bentz said.
Technically, support for NYMEX front-month crude was pegged at $92.75/b, which is the 50% retracement of the $74.95/b to $100.55/b move seen in late 2011, said Mike Fitzpatrick of Kilduff Group.
"A breach there may produce a steep decline to the $74.95 low from last year and possibly below," he noted.
