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Growing Glut of High-Quality Crude Signals Danger for Oil Market

  • Near-term Brent futures contracts are trading at discount
  • Oil refineries will soon shut for maintenance, damping demand

The physical oil market -- where traders buy and sell barrels on their journey from the well-head into the global refining system -- is looking increasingly fragile.

When Saudi Arabia and Russia agreed to boost oil production in late June, they assured traders high output wouldn’t flood the market. Less than two months later and the market doesn’t appear so certain as a small but steadily growing glut emerges of light, sweet crude, high-quality oil prized for its yield of valuable gasoline and lack of polluting sulfur molecules.