Oil futures fell more than 2 per cent on Wednesday to five-month lows, as a potential nuclear deal between Iran and the West eased supply concerns and worries about Greece’s future in the euro zone raised questions about demand.

Further pressure came from U.S. government data that showed weak demand and the ninth straight weekly build in domestic crude inventories, extending the stockpile buffer as the world’s largest consumer gears up for the start of the summer driving season.

“One aspect of the (U.S. Energy Information Administration) report stands out: The demand side is very poor, particularly the implied demand for gasoline and that is not good ahead of the Memorial Day holiday that starts the summer driving season,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.

Crude came under pressure early as investors worried about Greece’s possible exit from the euro zone sold commodities and equities and flocked to safer haven such as the dollar. Worries that a slowing euro zone economy could hurt fuel demand has helped drag Brent crude from 2012 highs over $126 a barrel in early March to near $105.

Euro-zone officials have agreed that each euro-zone country must prepare an individual contingency plan in the event that Greece decides to leave the single currency bloc. The agreement was reached during a teleconference of the Eurogroup Working Group, which lasted for about an hour on Monday.

Adding to oil investors’ concerns, the World Bank cut its economic growth forecast for No. 2 oil consumer China, following a recent spate of weak data which implied moderating growth.

In London, ICE Brent for July delivery fell $2.85 to settle at $105.56 a barrel after touching a session low of $105.39 a barrel, the lowest front-month Brent intraday price since Dec. 20.

U.S. July crude settled at $89.90 a barrel, falling $1.95, the lowest close for front-month U.S. crude since Oct. 21. Both Brent and U.S. dipped to around 23 on the 14-day relative strength index, well below the 30 level typically seen as a being oversold.

Trading volumes, which were light earlier in the week, improved slightly, with Brent activity close to the 30-day average. U.S. crude trade was about 17 per cent below that level.

INVENTORIES, IRAN

U.S. crude stockpiles rose in the week to May 18 to the highest level since August 1990, the EIA data showed. It was the biggest nine-week increase on record, supported by rising domestic production and limp demand. Implied demand for gasoline lagged year-ago levels by 1.9 per cent.

Crude prices also came under pressure as talks looked likely to defuse the long standoff between Iran and the so-called P5+1 powers – the United States, Russia, China, France, Britain and Germany – over Tehran’s atomic energy program.

Crude has drawn support this year from the threat of major disruptions to the OPEC nation’s crude supplies due to sanctions aimed at curbing Iran’s nuclear ambitions.

“The Iranians seem to be softening their position and that could lead to an easing of sanctions,” said Christopher Bellew at Jefferies Bache.