Brent crude falls in late gasoline, spread sell off

Brent crude fell on Thursday, dragged down in an aggressive late sell off in gasoline and spreads due in part to U.S. demand concerns.

After trading positive for most of the day, Brent tumbled in late afternoon activity as crude and gasoline trading volumes jumped.

Market players said growing concerns about U.S. gasoline demand, which has been lagging year-ago levels by 2.2 percent over the last four weeks in the midst of the summer driving season, helped spark the sell off.

"I think part of what we are seeing here is a recognition of where we are in the summer driving season -- we don't have that much driving season demand in front of us," said Tim Evans, energy analyst for Citi Futures Perspective in New York.

Brent, considered a better benchmark of market conditions globally and in the giant U.S. Gulf Coast refining region than U.S. crude, had been traded up for most of the U.S. trading session on optimism about a possible deal to bail out Greece and news that the world's biggest oil consuming nations would not release more crude.

Gasoline futures tumbled 1.5 percent and the RBOB crack spread fell 13 percent. Brent crude fell 64 cents to settle at $117.51 a barrel.

U.S. crude held on to gains to settle up 73 cents at $99.13 a barrel, after earlier rising above $100 a barrel and breaking out of the $93 and $99 a barrel trading range seen for most of July.

U.S. crude traded volume was around 703,200 contracts, almost 23 percent below the 30-day average, as of 4:50 p.m. EDT (2050 GMT) while Brent volume hit 437,000 lots, down almost 34 percent from the 30-day average.

Additional pressure came from spread selling between the two futures contracts, with the premium of Brent to U.S. crude narrowing $1.15 to $18.50 a barrel in late activity, traders said.

The recent drawdowns in inventories at the Cushing, Oklahoma delivery point for the U.S. contract, which last week hit the lowest level since December 24, helped prompt the sell off, according to market participants.

The premium of Brent to U.S. crude hit a record over $23 a barrel earlier this month, supported by rising flows of Canadian crude into Cushing and other parts of the Midwest.

EARLY SUPPORT FROM IEA, GREECE HOPES

Crude earlier found support from news euro zone leaders were set to give their financial rescue fund new powers to help Greece overcome its debt crisis that eased concerns that have weighed on oil and other markets in recent weeks.

Further support came from upbeat data showing factory activity in the U.S. Mid-Atlantic region bounced back in July, as well as news members of the IEA decided against releasing more oil stockpiles despite the threat of high prices to the economic recover.

The IEA shocked oil markets in June, announcing it would release 60 million barrels of oil to help replace disruptions of Libyan supply and bring down prices. Prices initially plunged, but in the month since the announcement, Brent prices have climbed back more than $10 a barrel.

But on Thursday, the energy watchdog for the industrialized nations confirmed what many analysts had expected, saying not a single one of its 28 members had asked for more oil to be released, including the United States, one of the architects of the first release a month ago.

In addition, the United States has no plans to do a unilateral release of its own strategic reserves right now, the Department of Energy said.

In Asian trading, crude prices fell on news that manufacturing in China contracted for the first time in a year in July, as monetary tightening and sluggish global demand weighed on the economy. China is seen as a major source of future oil demand growth.

(Reporting by Gene Ramos, Janet McGurty, Selam Gebrekidan and Matthew Robinson in New York; Barbara Lewis in London: Seng Li Peng in Singapore; Editing by Marguerita Choy)

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