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Oil falls most in five months as worries about Greece, China spread

Crude tumbled the most in five months amid mounting concern about economic stability in Europe and Asia.

Futures dropped 7.7 percent in New York and 6.3 percent in London. European leaders will hold an emergency summit Tuesday after Greek voters rejected creditors’ bailout terms. China is seeking to restore investor confidence after the Shanghai Composite slumped since mid-June. US Secretary of State John Kerry tempered expectations that diplomats in Vienna will quickly reach a deal with Iran.

Oil last week slumped the most since March amid speculation that the Greek crisis prompted investors to eschew riskier assets. Iran, the fourth-largest member of the Organization of Petroleum Exporting Countries, has estimated it could double crude exports from about 1 million barrels a day within six months of sanctions being lifted.

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“We’re getting our summer correction and I don’t know where it will stop,” Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by phone. “We could soon be looking at $50-a-barrel ceiling for WTI.”

West Texas Intermediate for August delivery fell $4.40 to close at $52.53 on the New York Mercantile Exchange. It was the lowest settlement since April 13. There was no floor trading Friday because of the Fourth of July holiday and electronic transactions were booked Monday for settlement purposes.

Brent for August settlement declined $3.78 to $56.54 a barrel on the London-based ICE Futures Europe exchange. It was the lowest closing price since April 8. The European benchmark closed at a $4.01 premium to WTI.

The result of the Greek vote on Sunday reverberated quickly across Europe’s political establishment. German Chancellor Angela Merkel and French President Francois Hollande called for a summit of euro-area leaders Tuesday, with banks including JPMorgan Chase & Co. saying a Greek departure from the euro is now the most probable scenario.

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“We’ve got a toxic brew for the crude-oil bulls,” Bob Yawger, director of the futures division at Mizuho Securities USA Inc. in New York, said by phone. “There’s a lot of news out there and all of it is negative for the oil market.”

The US and Iran hold the key to a nuclear accord between world powers and the Persian Gulf nation, China’s Foreign Minister Wang Yi said in Vienna, where talks on an agreement to return Iran to world markets continue.

“We are not yet where we need to be on several of the most difficult issues,” Kerry said Sunday. The negotiations may extend a day or two beyond Tuesday’s deadline, Iran’s Fars news agency reported, citing a senior diplomat.

Iran remains a long way off from selling more crude, according to Goldman Sachs Group Inc., Bank of America Corp. and Societe Generale SA. Its goal of boosting exports by 50 percent would require an extra 500,000 barrels a day of production, which the banks predicted will take six to 12 months as the nation revives aging oil wells.

The market may see additional supplies from floating storage if a nuclear deal is reached with Iran, Morgan Stanley analysts including Adam Longson said in an e-mailed report dated July 6.

“An agreement with Iran may be near,” Yawger said. “It will probably be November or December before a verification system is in place and 2016 before we see an uptick in oil output. It’s still going to put a lot of downward pressure on prices.”

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The Shanghai Composite completed its biggest three-week tumble since 1992 on July 3. A group of 21 brokerages led by Citic Securities Co. will invest at least 120 billion yuan ($19.3 billion) in a stock-market fund, the Securities Association of China said the next day.

The number of active oil rigs in the US rose by 12 to 640 last week, ending the longest decline on record, according to Baker Hughes Inc. data Thursday.

“The news from China looks bad, the Greek situation continues to worsen and now the rig count in the US is rising again,” Lynch said. “There’s lots of news out there and it’s all negative for the market.”

Gasoline futures for August delivery decreased 11.06 cents, or 5.4 percent, to close at $1.9237 a gallon in New York. That was the lowest since April 21.

The average price for gasoline at the pump declined 0.2 cent to $2.765 on Sunday, according to Heathrow, Florida-based AAA, the nation’s biggest motoring group.