Oil prices drop on Greek debt drama

Oil prices fell further on Monday, with investors still worried over the Greek debt crisis, traders said. New York's main contract, light sweet crude for delivery in November, fell $1.19 to $86.77 a barrel. Brent North Sea crude for November dipped 47 cents to $111.75 in early afternoon London deals. "Crude oil prices started the week on a negative side, as weaker global equity markets and persistent concerns about Greek debt crisis weighed heavily on market sentiment and prompted investors to lock in recent profits," said Sucden analyst Myrto Sokou. European stock markets slumped and the euro fell sharply against the dollar as Athens struggled to convince international leaders that it can avoid a default of its debt. As Greece's finance minister prepared for crisis talks with eurozone and International Monetary Fund officials at about 1600 GMT, the IMF gave the eurozone nation an ultimatum -- to introduce more budget austerity to win the release of rescue funds and escape bankruptcy. The IMF also warned Greece that any more delay over its privatisation programme would tip it into default. "Greece's debt crisis will continue to dominate the markets, while the euro is likely to receive further pressure amid contagious fears in other eurozone's countries," Sokou added. Markets increasingly expect Greece to default on its debt mountain under a crippling domestic austerity drive. Last week, eurozone finance ministers meeting in Poland decided to delay until October a decision on eight billion euros ($11 billion) of bailout loans blocked until Greece persuades auditors it is on track to cut its deficit. US Treasury Secretary Timothy Geithner, who attended the meeting, and his German counterpart Wolfgang Schaeuble also disagreed over Europe's handling of the debt crisis. Any discord could affect attempts to mount coordinated action to deal with the crisis before it gets out of hand and batters the global financial system further, analysts said. Analysts said investors were also setting their sights on an expected announcement by US President Barack Obama on spending cuts, which could crimp demand in the world's biggest oil-consuming nation. Obama will call on Monday for new deficit cuts of $3.0 trillion, US officials said. Investors are also awaiting the results of a meeting on Tuesday and Wednesday of the US central bank's Federal Open Market Committee, which traders hope will announce fresh monetary loosening measures.