Brent crude falls

Brent crude fell on Tuesday, dragged down by the sell off in the spread to US crude and a warning about risks to Spain's economy that added to concerns about the eurozone. A sell off in the spread between Brent crude and US oil futures added pressure, narrowing the London grade's premium to below $17 a barrel for the first time since June 9 as West Texas Intermediate staged a late session rally to end higher.
Crude prices turned negative just before noon in New York trading, with the move picking up momentum after the International Monetary Fund warned Spain faces considerable risks to economic recovery and must deepen and conclude reform work to allay market concerns.
"Crude futures fell back on the news of the IMF warning that the repair of Spain's economy is incomplete and that risks are still considerable," said Phil Flynn, analyst for PFGBest Research in Chicago. "People are also concerned that the confidence vote on the Greek government later today won't go as smoothly as earlier thought."
Prices had risen in early trade, with gains pegged to the weakening in the dollar after optimistic news that Prime Minister George Papandreou's cabinet would survive a confidence vote. Brent August crude tumbled 74 cents to $110.95 a barrel, off earlier highs of $113.10 a barrel and marking the lowest settlement since May 23.
US crude for July delivery, which expires on Tuesday, rose 14 cents to settle at $93.40. The more heavily traded August contract rose 54 cents to settle at $94.17 a barrel. Brent crude reversed after failing to match Monday's intra-day high and hitting resistance at the 50 percent Fibonacci retracement point of the price gains achieved between May and June.
US trading volumes were light, about 32 percent below the 30-day average just after the settlement at 493,000 lots. Brent traded a similar volume - 484,000 lots - about average for the 30-day period. Analysts said that while crude oil prices remain high, the spectre of weak demand and economic concerns have raised concerns among traders, with Brent crude falling for three straight sessions.
"This is one of those markets where there is not a lot supporting it," said Peter Beutel, president of Cameron Hanover, trading consultants in New Canaan, Connecticut. "At any given moment it can start dropping because there is no fundamental support, the demand numbers are not strong - these are the kinds of numbers you seen in a recession, not an expansion."
Traders were awaiting weekly US oil inventory data from the American Petroleum Institute, due out later on Tuesday, for further fundamental direction. Analysts polled by Reuters expect the data to show a small drop in crude oil inventories for the week to June 17 due to lower imports and higher refinery utilisation, and a 900,000 barrel build in gasoline inventories.