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Oil prices dropped on Thursday on fears that despite an improving U.S. economy, supplies are far outstripping demand.

After quotations at ICE and NYMEX had slumped Wednesday evening, oil prices edged higher on some short-covering early Thursday morning. The technical constellation and physical supplies pointed to further tests of the downside, however, and so, oil futures soon continued to decline. The potentially bullish factors that are still resulting from the geopolitical tensions in Iraq, Ukraine, Gaza and Libya and the losses futures marked after Brent's break below its side trend now and again prompted investors to cover their short positions. This short-covering limited losses. Given these contradictory cues, oil futures at ICE and NYMEX eventually consolidated sideways. However, after the roller-coaster ride oil futures saw in late trade, they finally settled with some losses. Particularly WTI sharply declined in the evening. Futures with sooner delivery marked more losses than those with later delivery. This was due to the shut-down of a US refinery that will be unable to process crude oil for longer than expected.

ICE Gasoil contract for August delivery settled at 887.00 USD on Thursday, this is -6.25 USD below Wednesday's settlement. With some 42,600 deals the traded volume (front month) was below average.

The lines of the stochastic indicator aren't drifting apart any longer leading to expect that the bearish cues that had been generated when the lines of the indicator had crossed have largely been spent. Brent's break below its side trend generated more downward potential in the middle of the week. This downward potential is still given but currently the technical constellation doesn't provide any clear selling signals so oil futures don't seize there downward slack. Technically, there will only be a new selling signal if oil futures drop below Thursday's lows. That is why we are currently assessing the technical constellation as neutral.

U.S.

Nymex above avarage: After Thursday evenings' decline, futures at ICE and NYMEX have regained ground this morning on some short-covering and uplifting economic data out of China. The traded volume at NYMEX is above average for this time of day. Traders are watching the development at stock and forex markets now. They will also keep eying the situation in Iraq, Ukraine, Israel and Libya and the raft of economic indicators due today.

Houston (ex-wharf indications 1-8)
380cst $587
180cst $673
MGO $964

New Orleans (ex-wharf indications 1-8)
380cst $594
180cst $670
MGO $967

Singapore (delivered indications 1-8)

WTI is down with -$1.41. Singapore paper is up with +$0.10 for 180cst and x$0.00 for 380cst for Aug, and for Sep 180 cst +$1.00 and 380cst with +$1.05 with MGO contracts Aug gaining with +$0.70 and in Sep with +$0.71. The cargo market is losing with 180cst -$0.74, 380cst with -$1.92 and MGO with -$1.34.

The Singapore fuel oil prices dipped between -$2.5 and -$1.0 during the Asian Platts window yesterday. The Asian fuel oil crack strengthened as fuel remained supported and crude values lagged. The delivered bunker premiums continued to be firm and strengthen to +$10.0 to +$12.00 above cargo on short term tightness.

380cst $599
180cst $608
MGO $880

Fujairah (delivered indications 1-8)

380cst $621
180cst $645
MGO $982

ARA (Amsterdam - Rotterdam - Antwerp)

(delivered indications 1-8)
380cst : $570
(1.0 %) : $585
180cst: $600
MGO 0.1%S: $875