(MENAFN- AFP) Oil prices fell back Tuesday, reversing earlier gains as traders fretted over global demand worries arising from the Chinese stock market rout and a potential Greek exit from the eurozone.
In late afternoon deals, Brent North Sea crude for August delivery shed seven cents to $56.47 a barrel.
West Texas Intermediate for August dipped 50 cents to $52.03 per barrel in New York.
Crude futures had earlier rebounded, having slumped on Monday as Greek defiance against austerity measures imposed by its creditors sparked turbulence in global markets.
"Having been crushed on Monday, crude oil struggled to bounce back on Tuesday," said analyst Jasper Lawler at trading firm CMC Markets.
"Modest early gains were easily given back as bears took hold of a market that is feeling renewed fears of supply and demand imbalance. Pressure remains to the downside for oil prices.
"Oil demand from China could decline further if the current stock market rout spreads to the rest of the economy, while a Greek exit could affect demand for oil from Europe."
Chinese shares took another tumble Tuesday, defying government efforts to arrest a precipitous fall that has wiped an estimated $3.2 trillion off markets and threatens the world's number-two economy.
The government over the weekend announced a halt to initial public offerings (IPOs) and moves to pour funds into the market to end three weeks of plunging prices.
The benchmark Shanghai Composite Index fell 1.29 percent in value. It was down as much as 5.05 percent during the day.
European stocks also sank Tuesday after German Chancellor Angela Merkel and French President Francois Hollande took a tough line with Greece, demanding "precise" proposals to restart talks after Greece voted down additional austerity measures.
On Monday, Brent oil had slumped $3.78 and WTI by $4.43 in highly volatile trade, as traders fretted over Greece and slowing global economic growth.
"Crude oil prices plunged yesterday as Greek uncertainty and worries over a slowdown of the Chinese economy weighed on market sentiment," noted Sucden analyst Myrto Sokou.
Analysts say one of the results of the Greek referendum could be an exit from the eurozone currency union, which could trigger a contagion effect.
With Greece's economy gasping for air, authorities there extended an eight-day bank closure until Thursday amid fears cash machines in the country were running dry.
The oil market was also watching the top-level negotiations in Vienna between Western powers and Iran on Tehran's nuclear ambitions.
Global powers negotiating with Iran to seal a deal curbing its nuclear programme are not yet where they want to be, a senior US official said.
The seven nations around the negotiating table on Tuesday admitted they would not meet a deadline for a deal and gave themselves a few more days to try to reach an accord aimed at putting a nuclear bomb out of Iran's reach.
An agreement would put pressure on oil prices as it will lead to the West lifting crippling economic sanctions against Iran and allow Iranian oil to flow back into an already oversupplied market.
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