Oil futures: Crude gives up gains on further SPR sales, physical crude seen tight
Quantum Commodity Intelligence - Crude oil futures Tuesday were trending lower ahead of Wednesday's US Federal Reserve interest rate decision, having given up earlier gains on reports that the US will sell an additional 20 million barrels of crude from the Strategic Petroleum Reserve.
Front-month September ICE Brent futures were trading at $104.58/b (1820 GMT), compared to the earlier high of $107.34/b and Monday's settle of $105.15/b.
At the same time, September NYMEX WTI was trading $95.14/b, versus Monday's settle of $96.70/b.
Markets continue to show concerns over widespread talk of a global economic slowdown ahead of this week's expected US rate rise of 0.75% amid fears of a slowdown in energy demand.
The July Fed rate decision will be announced at 1800 GMT Wednesday, followed by Fed Chair Jerome Powell's press conference.
However, bulls continue to point to the strength of physical oil markets, noting steep backwardation and firm premiums for spot barrels suggesting a "disconnect" between physical and financial prices.
North Sea Forties, which is a key component of the Dated Brent' basket' of crudes, traded at a premium of $5.75/b on a CIF Rotterdam basis over the underlying Dated Brent swap on Monday.
In Asia, flagship medium sour grades, including Oman and Upper Zakum, were trading at premiums of more than $9/b over the underlying Dubai swap, reflecting the steep backwardation.
"This sell-off has been really concentrated in the financial market and far less apparent in the physical markets," said Jeff Currie, head of commodities research at Goldman Sachs.
"We still have very tight energy markets," Currie said in the interview with CNBC. "Spot prices are sitting above forward prices and it means you've got upside risk until you see more supply."
The Sep22/Oct22 Brent spread held around $5/b, while Brent's premium over WTI consolidated close to $9/b.
Brent against the Middle East Dubai benchmark was pegged at around $1.70/b for September, suggesting WTI is the laggard in the crude complex, weighed down by ongoing crude sales from the US Strategic Petroleum Reserve.
Oil markets also found support from European natural gas, which rallied 10% Monday as Russia further slashed supplies to Europe, gaining a further 13% Tuesday.
Additionally, the retreat in the US dollar since mid-July also helped oil markets, with the Dollar Index around 107 points Tuesday, having reached 109 earlier in the month.
