The cost of crude oil has plummeted to a five-month low, according to live forex charts. With many experts pointing the finger at the prospect of a Greek exit from the euro zone which is quashing demand for riskier assets.

The price slump seen slumped during Monday’s session – with New York's main contract West Texas Intermediate crude for delivery in June down $1.99 at $94.14 a barrel - was accompanied by a strengthening USD/EUR off the back of mounting euro zone worries. But according to Simon Denham, MD of Capital Spreads (pictured), the reasons for depressed oil prices are manifold: “Crude oil prices continue to hold below $96 pressured by the slowdown in China, turmoil surrounding Greece and the news from OPEC that supplies were 8 percent higher than consumer demand.

“With supplies more than ample and negative cues in the global economy sapping demand prices look set to remain under pressure”, he said.

A report of Chinese industrial output issued last week showed that industrial production rose by 9.3

percent in April, the lowest level since May 2009. Retail sales showed little more promise, with a shock rise of just 14.1 percent rise, the lowest level in over a year. Such figures from the world’s second-largest economy (and oil consumer) added to growing concern about the potential for global economic recovery and raised further queries about the impact of the worsening euro zone debt crisis.

Traders were left unaffected by a policy move on China’s part which specified that reserve holdings by banks would increase from 20.5 percent to 20.0 percent as of May 18. The third cut in six months, but no compensation for the weak growth figures which are plaguing trader sentiment.

Reports now suggest that Opec supply has risen to about 31.62m barrels per day (bpd), with Monday prices on the New York Mercantile Exchange at USD94.08 a barrel; a drop of 2.15 percent. Supply in Libya and Saudi Arabia has now begun to recover momentum and supply no longer a concern. Worry now rests with the potential for oil to succeed in stimulating growth. "In view of the plentiful supply, we believe the potential for recovery to be limited, making a return in anything like the near future to the price levels we saw before the sell-off unlikely," Commerzbank analyst Carsten Fritsch noted.

The world’s biggest producer, Saudi Arabia, has set itself a price target of $100 a barrel, with the oil minister, Ali al-Naimi, specifying that supply will have to continue to rise in order to meet increased demand in the latter half of the year.  "We need to get prices at a level around $100. Now, it is still high," al-Naimi was quoted as saying on Sunday by Dow Jones Newswires. "It is very important to recognise that supply today is 1.3 million to 1.5 million barrels per day over demand, which is good. It is going into inventory and bringing inventory up -- that should give comfort to consuming countries.”

Sarah Cox, Staff Writer