While signs of euro zone discord hit Brent and other risk markets ahead of Wednesday’s pivotal European Union leaders meeting, many traders focused more on the twist in the US market’s structure and the collapse in the Brent/WTI spread, which has sunk $7 in three days to its narrowest since July.

The market’s shift continued to deepen into a structure known as backwardation, where prompt futures are costlier than forward prices.

The spread between December 2011 and December 2012 futures surged from minus $1.65 a barrel on Friday to $2.76 on Tuesday, an unprecedented inversion that signals a key shift in mind-set toward a much tighter near-term market.

The collapse in the Brent/WTI spread and abrupt reversal from contango — which had prevailed since the 2008 financial crisis — appeared to lack any single trigger, instead stemming from traders’ capitulation to weeks of growing signs that US Midwest oil supplies were tightening.

While some analysts had said for some time that the market appeared to be overlooking tightening fundamentals, the violence of this week’s trade caught many off guard.

“The market had gotten secure in the notion that there is and there would be more than ample supplies of crude in and around Cushing, but the fact of the matter is that the supplies of crude deliverable against the NYMEX futures contracts are limited and falling rather than excessive and rising,” commodities investor Dennis Gartman said in a daily note.

By 12:45 p.m. EDT (1645 GMT), Brent crude futures dipped 27 cents to $111.18 a barrel, falling after a report that EU finance ministers had canceled a meeting, although a summit of leaders will still take place on Wednesday. It had traded as high as $112.15 earlier.

US crude jumped more than $4 briefly to hit an intraday high of $94.65, the loftiest price since Aug. 2. It later traded at $93.72, up $2.45.

US crude came off session highs after a report showed that US consumer confidence dropped in October unexpectedly to its lowest in 2-1/2 years. That stoked worries about US oil demand, analysts said.

“US consumer confidence disappointed,” said Tim Evans, energy analyst at Citi Futures Perspective in New York.

Trading volume in the US market was more than 15 percent above the 30-day average, though the flurry of short-covering and trend-following activity that had driven Monday’s volume to the highest since February had subsided slightly. Volume on Brent crude was about 13 percent below its 30-day average.

The discount on US crude against Brent narrowed to as little as $16.01 a barrel, the tightest since early July. As Brent pared losses, its premium to US crude edged up to above $17.

“The US crude price is responding to a swift reduction in US crude oil stocks in (the) past few weeks, which have plunged by over 10 percent since the end of May. The previous substantial inventory overhang has now been fully depleted,” said Carsten Fritsch, a commodity analyst at Commerzbank in Frankfurt.

“Stocks at Cushing are 25 percent below the record level of the spring,” he added.

Meanwhile, disputes in Europe weighed heavily on other financial markets, with Germany opposing a phrase in a draft conclusion for the EU summit that calls for the European Central Bank to continue buying bonds in the secondary market.

European Union leaders are to meet on Wednesday to consider plans for Greece’s debt to be reduced, European banks to be recapitalized and the euro zone’s rescue fund to be increased to provide partial insurance for sovereign bonds.