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By 0811 GMT, the front-month contract was down $2.93 at $103.90 a barrel. US crude futures were down $2.66 at $89.17 a barrel.
Weekend reports that Spanish regional authorities will have to go cap in hand to Spain's central government have driven up Spanish bond yields to critical levels, raising expectations that a sovereign bailout will be required.
The perceived safe haven of the US dollar has strengthened against a basket of currencies to a two-year high, putting further pressure on commodities priced in dollars.