* Hedge funds amass record bets on U.S. oil prices
* Strong WTI September/October backwardation draws investors
* G20 puts growth before austerity, vows to tread carefully
(Updates with settlement prices for new front-month September
By Nicolas Medina Mora Perez and Jeanine Prezioso
NEW YORK, July 22 U.S. oil prices pulled back
sharply on Monday from last week's 16-month high as traders sold
to lock in profits from a blistering rally that briefly sent
U.S. crude to a premium over Brent for the first time in nearly
Europe's benchmark Brent crude increased its premium over
U.S. West Texas Intermediate on Monday, with the September
CL-LCO1=R contract trading $1.47 higher than its U.S.
equivalent as support from tight U.S. supplies eased.
The August WTI contract tumbled more than 1 percent and
finished below $107 a barrel ahead of its expiration later in
the day, while the September contract showed smaller losses.
"We thought $110 was a price target but the more the market
dips into this range the more you'll see profiteers," said Rich
Ilczyszyn, chief market strategist and founder of iitrader.com
LLC in Chicago.
The WTI contract for August delivery lost $1.14
cents, settling at $106.91.
September WTI fell 93 cents to settle at $106.94,
converging with the expiring August contract as traders settled
their front-month positions. The October WTI contract was
significantly weaker, trading at $1.47 below the September
September Brent crude gained slightly, climbing 8
cents to settle at $108.15.
Gasoline futures fell more than crude, dropping 2.2
percent to $3.0547 a gallon, even as Valero reported the
gasoline-making unit at its Port Arthur, Texas, refinery, is
expected to be shut through late July. Gasoline futures hit a
4-1/2-month high on Friday at $3.16, but traders said pressure
was easing with the end of the U.S. summer driving season in
The convergence of the two front-month crude benchmarks
comes as increased pipeline capacity has drained the glut of oil
at the WTI delivery point of Cushing, Oklahoma, to the U.S. Gulf
Coast, where refinery demand has been high.
The easing of the Cushing glut has not led to lower prices
at the Gulf Coast as refineries there are eager to cash in on
robust margins and exports.
The price rally has also been driven by concerns that the
market is flipping from glut to tightness, fueling a sharper run
in prompt contracts to create a backward-dated market, with
near-term prices higher than those further in the future.
"The extraordinarily strong backwardation is strengthening
and bringing everyone into the WTI," said Olivier Jakob, an
analyst at Petromatrix in Zug, Switzerland.
Brent could garner support from a stronger demand outlook
and supply risks in the Middle East and Sudan, according to
Carsten Fritsch, analyst at Commerzbank.
Hedge funds amassed record bets on rising U.S. crude oil
prices in the week to July 16, trade data by the U.S. Commodity
Futures Trading Commission (CFTC) showed.
A pledge by the Group of 20 nations, which account for 90
percent of the world economy, to put growth before austerity has
fueled hopes of a recovery in the consumption of commodities.
Japanese Prime Minister Shinzo Abe won a decisive victory in
upper house elections, which was seen as a boost for his radical
economic stimulus policies.
(Additional reporting by Manash Goswami; Editing by Richard
Pullin, Jeff Coelho, Peter Galloway, Nick Zieminski and Bob