AnalysisOil continued its drop for the third day, heading for the biggest weekly drop in six, on possible Greek default and strengthening dollar.  

Crude oil for July delivery slipped near 5% on Wednesday, the lowest settlement since late February, after abysmal US manufacturing report and escalating European woes while yesterday it closed at $95.15 a barrel compared with the day's opening level of $95.35.  

Concerns that Greece might face a default are aggravating, especially after European leader's failure to reach an agreement over Greek rescue package. Jean Claude Junker, who leads European Finance Ministers, said Greece encounters “an extremely difficult process.”   

On June 20 EU leaders will meet to discuss the second Greek bailout while today German Chancellor Angela Merkel will meet French President Nicholas Sarkozy to discuss the same matter. On the other hand, a reshuffle of Greek Prime Minister is raising doubts the new austerity measures may be affected, thereby impacting the international bailout.   

On the upside, oil was boosted temporarily after the EIA report which showed that U.S commercial crude oil inventories decreased by 3.4 million barrels from the previous week, whereas total motor gasoline inventories increased by 0.6 million barrels and distillate fuel inventories decreased by 0.1 million barrels last week and are above the upper limit of the average range for this time of year.

In the FOREX market, the dollar continued its rise against a basket of major currencies, after yesterday's downside correction, as depicted by the dollar index which inclined to 75.60 after opening at 75.43, taking advantage of the escalating European debt woes which pushed the euro to three-week low against the greenback.

The dollar's strength is affecting dollar-denominated commodities as they become more expensive to investors.

Meanehile, oil is trading at $94.32 after recording a high of $95.37 and a low of $94.17.