Oil prices drop as Greek vote pushes up dollar

LONDON - Oil prices fell Monday as the dollar rallied against the euro after the anti-austerity party Syriza swept to victory in Greece's general elections.

The dollar jumped to an 11-year high against the European single currency, making dollar-denominated crude more expensive for holders of the euro, dampening demand.

US benchmark West Texas Intermediate (WTI) for March delivery dropped 52 cents to US$45.07 (S$60.60) a barrel.

Brent North Sea crude for March slid 60 cents to stand at US$48.19 a barrel in London afternoon deals compared with Friday's close.

Prices dropped "as further details of the Greek election outcome emerge", said Kash Kamal, analyst at Sucden brokers.

The victory by the Syriza Party, whose anti-austerity policies have sparked fears Greece could exit the eurozone, sent the euro plunging.

Syriza wants to renegotiate the terms of Greece's 240 billion euro (S$362 billion) bailout deal with the European Union and the International Monetary Fund which the party says is stifling any chance Greece has of economic recovery.

Singapore's DBS Bank said "markets will be worried over the new government's take on the reform agenda and austerity measures".

Oil was sitting at more than US$100 a barrel last June, but has since lost more than half its value owing to a supply glut, boosted largely by robust US production, and weak global demand.

The Organisation of Petroleum Exporting Countries (OPEC), led by Saudi Arabia, last November decided to keep output levels despite the oversupply.

"With a return to US$100 a barrel unlikely, market participants are expected to announce a fall in earnings and as a result aggressive cost cutting which will have a significant impact on the smaller producers," Kamal said.