Global crude futures continued to head south in European morning trading
on Tuesday, continuing the losses in Monday's broad selling spree across the
petroleum complex.
The drop in flat prices for both ICE Brent and NYMEX WTI futures was
triggered by several factors, including a substantial weakening in the front
of the curves, a lack of fresh bullish news and strong downward pressure from
product futures, sources said.
At 11:48 London time (10:48 GMT), front-month November ICE Brent futures
were down a further $1.20 to $76.44/barrel, having lost more than $1.50/b on
Monday.
Similarly, November NYMEX WTI futures were back below $80/b, losing $1.19
to $79.11/b, following a $1.42/b drop on Monday.
Middle Eastern crude futures also fell, with the December DME Oman
contract losing 95 cents to $72.95/b. The December ICE Dubai contract had not
traded yet.
The steep backwardation of the forward crude curves was a major support
factor for the recent price rallies, but in light of comfortable US crude
stocks of 320.6 million barrels, several analysts had questioned the
backwardated structure.
In the last trading session, however, a weakening at the front was
observable for both Brent and WTI. The November/December spread for ICE Brent
shrunk to 21 cents on Tuesday, while the NYMEX WTI spread was down to just
below $1/b, having been at $1.44/b last week.
Most of the downward pressure Monday emerged from weaker US product
futures, as an unseasonably high number of long positions in RBOB added
volatility to the market. While non-commercials, which are primarily comprised
of hedge funds, were holding a modest long position in crude futures and
options, they were long a record 50,007 lots in RBOB, according to the last
CFTC report.
"Equities trading again at record highs were not enough to bolster
confidence in the oil markets that were capped by pressure from the products.
The Large Speculative Funds remain counter-seasonally long in RBOB
gasoline, and with the lack of hurricane destruction on refining facilities
the petroleum cracks are coming under serious pressure," Petromatrix analysts
wrote in a report.
The technical trend in product futures is bearish. October ICE gasoil
lost $24/mt by Monday's close from Friday's all-time settle and continued that
trend on Tuesday, down another $9.50 to $679/mt.
Similarly, in the US, the NYMEX RBOB and heating oil November contracts
lost 1.55 cents and 1.63 cents to $2.1652/gallon and $1.9650/gallon,
respectively.
--Verena Peternell, verena_peternell@platts.com