Oil prices fall more than $1

Oil prices fell more than $1 on Monday, with U.S. crude dropping to its lowest in almost three weeks below $59 per barrel, after Greece imposed capital controls as lenders refused to extend the country's bailout.

Financial markets weakened across the board, with the euro dropping to its lowest in almost a month and share prices in Asia tumbling, amid worries of cash-strapped Greece being forced out of the euro zone. [MKTS/GLOB]

"As far as the oil market is concerned, the potential ramifications are downward," said Ric Spooner, chief market analyst at Sydney's CMC Markets. "If the situation drags out then that will be a dent to confidence for investors."

Brent crude was down $1.04 at $62.22 a barrel by 0625 GMT, near a one-week low of $62.20 hit earlier in the session. It closed up 6 cents at $63.26 a barrel on Friday.

U.S. crude was down $1.05 cents at $58.58 a barrel, after falling to $58.56 earlier, the lowest since June 9. The benchmark closed down 7 cents on Friday at $59.63.

Oil prices are expected to be volatile this week due to the Greek situation and negotiations on Iran's disputed nuclear program going on in Vienna, Phillip Futures said.

"For the Greek default, we believe oil prices are going to adjust based on the U.S. dollar index. If the euro continues to weaken, we could see crude prices continue to drop, similar to what we have seen at market open," it said.

Oil prices would immediately tumble if Iran and six world powers agreed a nuclear deal, Phillip Futures said.

Iran is backtracking from an interim nuclear agreement with world powers three months ago, Western officials suggested on Sunday, as U.S. and Iranian officials said talks on a final accord would likely run past a June 30 deadline.

Securing an agreement would end the nuclear standoff between Iran and the West. This could eventually lead to suspending sanctions and allow Tehran to raise crude exports, adding to an already well-supplied world market.

"The surplus in the market isn't going to clear terribly quickly. Indeed, it could be somewhere in the middle of 2016 till we start eating into inventories on a global basis so we’re relatively cautious in terms of upside," said David Fyfe, head of market research & analysis at Gunvor Group.

"On the flip side, at $60, a lot of people are stopping developing new projects, there's maybe a million barrels a day (of oil) by 2017 that's not going to be there. So at some stage, there's going to be rebound in prices when some of these project deferrals start having an impact on the market," Fyfe added.