Concerns over a bailout for the Spanish banking sector loomed as the market lost confidence on the government strategy to recapitalize the sector. Worries about the situation in Greece re-emerged as the weekend polls showing the leading position of the New Democracy Party have been offset by 3 new polls showing different outcomes. Market sentiment was dampened by the ongoing crisis in the Eurozone. Wall Street slumped with the DJIA and the S&P 500 losing -1.28% and -1.43% respectively. Stocks also slumped in Asian session today. In the commodity sector, crude oil plummeted with the front-month contract for WTI crude oil diving to as low as 87.27 before settling at 87.82, down -3.24%, while the equivalent Brent crude contract plunging to a new 5-month low of 102.87 before ending the day at 103.47, down -3.01%. Gold initially declined but then rebounded to end the day at 1563.4, up +0.95%.

The Spanish government continued to struggle with methods to deal with its unhealthy banking sector. The market currently speculated that it wants the ECB to directly purchase its sovereign debt and for the EFSF/ESM to directly recapitalize its banks. This is viewed as a first step towards a bailout. Meanwhile, there was news that the EU may allow Spain to have more time to reduce its budget deficit below the Maastricht 3% cap. According to Economic and Monetary Affairs Commissioner Olli Rehn, EU leaders are ready to consider proposing an extension of the deadline to correct the excessive deficit by one year to 2014, if the country agreed to reverse overspending, implement financial sector reforms & recapitalize its troubled banks.

In Greece, market sentiment was again unnerved by 3 new polling results with New Democracy leading in one, Syriza ahead in another and the 2 parties tied in a third. These easily erased the optimism over the weekend that New Democracy was shown leading the election. Moreover, 77% of respondents said the terms of the bailout should be revised. 52.4% believed they should stay in the euro if they were forced to accept the current austerity measures tied to the bailout, while 44.5% said they shouldn't. Still the over 80% said they wanted to remain in the euro.

Concerning the US oil inventory, the industry-sponsored API estimated that crude inventory dropped -0.35 mmb in the week ended May 25. Gasoline stock increased +2.10 mmb while distillate stock slipped -1.30 mmb. The DOE/EIA probably showed a +0.8 increase in crude inventory. For fuels, gasoline stockpile might have slipped -0.25 mmb while distillate stayed flat.