Bond rating agency Standard & Poor's on Monday cut Greece's credit rating, saying the country is likely to default.

S&P said the downgrade from B to CCC "reflects our view that there is a significantly higher likelihood of one or more defaults" as the country tries to close financing gaps. It also said the outlook is negative

The move came only days after the Greek government unveiled a program of spending cuts and tax hikes aimed at saving around $28 billion Cdn, seen as essential in securing the fifth installment of a $110 billion bailout package agreed on in May 2010 with the European Union and the International Monetary Fund.

The agency said risks associated with the bailout "are rising, given the increasingly complicated political environment in Greece coupled with its current difficult economic climate."

The downgrade of Greek debt led to a sell-off in oil as investors bet that Greece's financial troubles could weigh down the entire continent, oil analyst Andrew Lipow said. Europe, which consumes about 18 per cent of the world's oil, could see energy demand fall if its economy struggles.

"A default could drag down the rest of the European economies and consequently affect world growth," Lipow said.

Benchmark West Texas Intermediate crude dropped $1.99, or two per cent, to settle at $97.30 per barrel on the New York Mercantile Exchange, its lowest level since May 17.

With files from The Associated Press