Oil falls on Greece debt woes

SINGAPORE: Oil prices extended losses in Asian trade Wednesday as the US dollar strengthened after Greece's debt rating was downgraded, analysts said.

Fears about the impact of the downgrade on the group of countries using the euro currency, collectively known as the eurozone, have shaken financial markets worldwide.

New York's main contract, light sweet crude for June, dipped 37 cents to 82.07 dollars in afternoon trade.

Brent North Sea crude for June was down 53 cents to 85.25 dollars per barrel.

"The thing that's weighing on oil prices is mainly the currency movements, as the US dollar has been higher," Ben Westmore, a minerals and energy economist with the National Australia Bank, told AFP.

Greece faces a May 19 deadline to repay nine billion euros (12 billion dollars) in maturing debt. The downgrade by credit ratings agency Standard & Poor's effectively shuts down its access to private capital.

The euro hovered near one-year lows against the dollar in Asian trade Wednesday as investors fled from the single currency with the risk of a Greek default looming.

Overnight in New York, the euro fell below 1.32 dollars for the first time since April 28 last year, after Greece's debt rating was downgraded to junk status.

A stronger US currency makes dollar-denominated crude oil more expensive to holders of weaker units, dampening demand and leading to lower prices.

Tumbling Asian stocks also weighed down on the oil market.

Tokyo shares closed down 2.57 percent, Seoul ended 0.89 percent lower, Sydney lost 1.17 percent while Taipei closed down 0.80 percent. Hong Kong slumped 1.26 percent by the break and Singapore eased 1.41 percent.

Oil investors are also looking to the results of a US Federal Reserve board meeting on whether or not to raise its main interest rate, as well as the weekly energy inventories report by the US Department of Energy (DoE).

The DoE report, to be released later Wednesday, is closely watched because it gives an indication of demand in the United States, the world's biggest economy and the largest energy consuming nation.