In a week of market turmoil resulting from Greece's fiscal crisis, oil went from an intraday high above $87 on Monday - its highest point in more than a year and a half - to plunge briefly below $75 on Friday.
The Greek crisis, exacerbated by a still-unexplained glitch in U.S. stock trading on Thursday that saw the Dow Jones Industrial Average plunge 9% in a matter of minutes before recovering, sent financial speculators scrambling for the sidelines, liquidating their long positions.
The benchmark West Texas Intermediate contract settled at $75.11 a barrel on Friday, its lowest point since February, compared to $86.15 a week earlier - a decline of nearly 13%.
Friday's announcement of an unexpected increase in the unemployment rate to 9.9% in April from 9.7% in March cut short any hope of a rebound following the 3.6% drop in oil prices on Thursday amid the gyrations in the stock market.
U.S. government data on Wednesday showing that crude oil inventories had increased by 2.8 million barrels - almost double expectations - lent momentum to the price decline that began on Tuesday as unrest in Greece and uncertainty about its bailout raised fears of the crisis spreading to other Eurozone countries.
The European crisis not only threatened to stifle economic recovery, but also pushed the euro down below $1.30, further depressing the dollar-denominated oil price.
Fears grew in the market that even at $140 billion, the bailout package for Greece would not be sufficient to resolve the country's fiscal crisis, especially as strikes and riots that have claimed three lives continued to roil the nation's capital.
The knock-on effects of a credit crisis at other highly indebted euro zone countries, such as Spain and Portugal, and the threat to European banks that hold a lot of European sovereign debt also spooked equity, bond and commodities markets.
The German parliament on Friday approved the Greek bailout, but Chancellor Angela Merkel faces a tough political test in a regional election on Sunday in North Rhine-Westphalia, Germany's most populous state. German backing is seen as crucial to any effort to keep the crisis from spreading and to keep the euro intact.
By. Darrell Delamaide for Oilprice.com who offer detailed analysis on Crude oil, Geopolitics, Gold and most other http://oilprice.com/Metals/Commodities/ target=new>Commodities. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com