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Oil prices fell as investors fretted about the troubled Spanish banking sector, which could trigger a Europe-wide recession.
Oil prices fell today along with global shares after Spanish bond yields shot to euro-era highs as concerns about the country’s debt-stricken banking system overshadowed a positive election result in Greece, the Associated Press reported.
Crude oil futures for July delivery fell $1.04, or 1.2 percent, to $83.01 a barrel in New York, MarketWatch reported.
Brent August crude fell $1.48 to $96.13 a barrel.
Initial relief at the Greek election result on Sunday, which saw the pro-austerity New Democracy party clinch a narrow victory, was quickly replaced with fears about the Spanish economy, the fourth largest in the euro zone, Reuters said.
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Madrid agreed last week to an international bailout of up to $100 billion euros ($125.8 billion) for its stricken banking sector, but investors are worried about whether that will be enough to resolve its problems.
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A central bank report showing bad loans held by Spanish banks hit an 18-year high in April only served to fuel these concerns, the Wall Street Journal reported.
According to MarketWatch, the yield on Spain’s 10-year bond surged past seven percent to the highest level since the creation of the euro. Yields on Italian 10-year bonds were above six percent.
Higher yields reflect fears that Spain and Italy could default on their debts, which could spark a Europe-wide recession and further erode global growth.
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