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As supplies increase, the summer demand ends and the oil price structure is narrowed.

The premiums for benchmark oil prices are declining compared to those of future months due to the increased production in the Middle East, Latin America, and Europe just as summer peak demand is ending, traders and analysts reported on Thursday.

Oil prices are also affected by the easing of concerns that the U.S. may impose additional sanctions on Russia, causing further disruptions to oil supplies.

Brent futures time spreads over six months U.S. West Texas intermediate futures Middle East benchmark Dubai has narrowed its backwardation by more than one dollar per barrel since the beginning of the month.

Backwardation is a market structure in which the prices of immediate months are higher than future months. This indicates a tight supply. The market expects a rise in supplies if the structure narrows.

The Brent and Dubai time spreads have weakened mainly due to expectations of increased OPEC+ supplies in September, and the easing of fears of Russian disruption following recent steady flows via Baltic and Black Sea.

He said that "U.S. Crude Supply remains Stable, but Refinery Runs will gradually decrease into the shoulder seasons, which will ease prompt tightness."

The U.S. president Donald Trump will meet with the Russian president Vladimir Putin in Alaska, on Friday, to reach a ceasefire agreement in Ukraine.

Citi analysts predicted that Brent oil could fall to the low $60s per barrel if a U.S. - Russian deal is reached.

RISE IN SUPPLY AT THE END OF SUMMER

Traders expect more supplies now that the Organization of the Petroleum Exporting Countries (OPEC+) and its allies have agreed to boost September production. This comes as non-OPEC producers like Guyana, Brazil, and Norway begin new production.

The sources also said that the peak oil demand of the Northern Hemisphere's summer has ended, cooling the red-hot margins for diesel in Europe, and decreasing the burning crude to generate electricity in Saudi Arabia.

Harry Tchilinguirian is the group head of Onyx capital Group's research. He said that the physical trade on the North Sea Market was awash with "sales in the window" as expectations around crude demand were revised down.

Where do the extra Saudi barrels end up?

The spot premiums in the Middle East for benchmarks Dubai, Oman and October-loading supply were at their lowest level for more than a week.

Dubai's relative strength is still greater than Brent. This allows the Atlantic Basin to export its oil to Asia, while keeping the spread between benchmarks, also known as Exchange of Futures for Swaps, narrow.

Millions of barrels of oil have been purchased by Asian refiners from the United States and other countries in Africa and Europe, for delivery between September and October.

Neil Crosby of Sparta Commodities said that there was still uncertainty about Russian oil supply, with India, the third largest oil importer in the world, buying spot cargoes recently to replace Russian oil.

He said: "Some Urals (Russian oil) will be shipped to China, but this story is not yet over. There is still a tail risk as to what happens to Russian oil that is not cleared. This makes short-term EFS trading even more difficult than usual."

(source: Reuters)