Oil futures: Brent tumbles from highs in late sell off on SPR reports

Quantum Commodity Intelligence - Crude oil futures Tuesday were trading lower on the day, following another choppy session that had seen prices hit fresh three-month highs before slumping back in a late sell off, which came amid reports of the next crude oil sale from the US SPR.

Front-month August ICE Brent futures were trading at $120.20/b (1925 GMT), compared to Monday's settle of $122.27/b, and well down from Tuesday's three-month high of $125.19/b.

At the same time, July NYMEX WTI was trading $118.01/b, versus Tuesday's settle of $120.93b and Tuesday's high of $123.64/b.

The DOE confirmed it was selling up to 45 million barrels of SPR crude for mid-August to end-September loading, although consensus suggested it was part of a previous announcement, rather than additional barrels.

Prices were higher for most of the session, extending the gains following Monday's strong recovery. 

"The oil market managed to weather the broader sell-off across financial markets better than the rest of the commodities complex (Monday). Having traded lower for much of the day, ICE Brent still managed to finish the day marginally higher," noted Warren Patterson, head of ING's commodity research.

Traders said there was no specific trigger for Monday's $3/b rebound in crude prices, although a timely reminder of struggling Libyan production and broader supply concerns supported the recovery.

"Crude prices turned positive despite a bloodbath on Wall Street after energy traders were reminded that the oil market will remain very tight as spending on exploration and development was depressed in 2021. The EIA reported that 119 companies only spent $244 billion on E&D in 2021, which is 28% less than before COVID average levels," said Ed Moya, senior market analyst at brokerage Oanda.

Libya's oil minister, Mohammed Aoun, said that as much as 1.1 million bpd of Libya's total output is now shut in by protests at oilfields across the country, underpinning further gains Tuesday.

Markets continue to eye the various Covid outbreaks across China, particularly Beijing's reaction, as it maintains its zero-Covid policy.

China was largely seen in recovery mode after the most recent lockdown in the capital and Shanghai, but the further outbreaks may lead to a fresh wave of restrictions, cautioned analysts.