07/06/2015 09:00 EDT | Updated 07/06/2016 05:59 EDT

Greek bailout vote prompts big drop in oil, loonie

The price of oil plunged by more than $4 US a barrel Monday following the strong No Greek voters delivered in Sunday's bailout referendum.

The August contract for light crude oil futures settled down $4.40 at $52.53 in afternoon trading — a drop of 7.7 per cent. That's a three-month low for oil. Brent crude slipped below $60 US for the first time since April. Oil was being pressured by a broadly stronger U.S. dollar and by uncertainty in China. 

Economists said the markets had not been expecting such a strong No vote in Greece.  

"The result was clearly a more decisive 'No' than the polls had suggested," said Pavel Molchanov, equity research analyst at Raymond James. "This couldn't be more bearish for equities and commodities alike."

"Uncertainty over Greece is bearish for oil," agreed Olivier Jakob, senior energy analyst at Petromatrix. "It adds an extra negative factor on top of the turmoil in Chinese financial markets, the recent rise in U.S. drilling rigs, and a potential increase in Iranian oil supply," he told Reuters.

Following oil lower, the Canadian dollar closed at 79.04 cents US, down 0.58 cents from Friday's close. That's the lowest level for the loonie versus the American currency in three months.

"The renewed decline in oil prices is weighing on [the Canadian dollar], as [West Texas Intermediate oil] falls below $55/bbl to levels last seen in April," wrote Eric Theoret, a foreign exchange strategist at Scotiabank in a morning commentary.

Theoret said domestic economic data in the coming days will determine the loonie's short-term direction. "Trade, housing, and employment releases should maintain a focus on domestic developments through the remainder of the week," he added.

The Canadian dollar has also been under pressure because of speculation that the Bank of Canada may drop its key interest rate in light of the country's sluggish growth.  

Markets lower

North American stock markets moved lower on Monday. In Toronto, the S&P/TSX lost 88.82 points to close at 14,593.57. The Dow Jones industrial average dropped 46.53 points to 17,683.58.

European markets closed lower, but not dramatically so. In Europe, Germany's DAX fell 1.5 per cent while the CAC-40 in France fell two per cent. The FTSE 100 index of leading British shares was 0.8 per cent lower.

Some market analysts attributed the relatively muted reaction to the resignation of the Greek finance minister — a move that they felt might help bailout talks resume. 

But some analysts were more pessimistic about the prospects of a bailout deal.

"The referendum's result adds another layer of uncertainty to a very uncertain situation," said Diego Iscaro, a senior economist for IHS Global Insight. "Negotiations will resume over the coming days, but the probability of a deal is distant."