What's Moving the Oil Markets?

•Crude futures continued to head south 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 10:48 GMT, Nov ICE Brent futures were down a further $1.20 to $76.44/barrel, having lost more than $1.50/b on Monday. Nove NYMEX WTI lost $1.19 to $79.11/b, following a $1.42/b drop on Monday. 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.

•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.

Updated: October 2, 2007