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WTI oil futures were lower this morning, as investors awaited the release of weekly supply data out of the U.S. later in the session to gauge the strength of oil demand from the world’s largest consumer.

After the hefty losses oil futures had marked on Tuesday, market fundamentals as well as the technical constellation pointed to another test of the downside. Still, futures didn't immediately keep track of their losses as traders at first took some profits from the short positions they had raised on Tuesday increasing their buying orders (short covering). Jefferies analysts say that the tendency of short coverings after a decline like the one oil markets had seen on Tuesday - with Brent and Gasoil hitting new long-time lows - was "not surprising". The bullish survey regarding US oil inventories added to the upside even though the overall situation on the market is still bearish. In the course of the day, market sentiment switched, however, as there were reports on a possible ceasefire in Ukraine. A ceasefire might prevent further sanctions between the EU and Russia or even lead to a reduction of existing sanctions. This might strengthen the European and the Russian economy, as well as oil demand. Eventually, this interpretation leads to further gains at ICE and NYMEX. Oil futures completely made up for the losses they had marked on Tuesday. The API's report on US oil inventories (released at 10.30 p.m. last night) came in rather bearish compared to the survey but at last oil futures settled near their highs.

ICE Gasoil contract for September delivery settled at 862.50 USD on Wednesday, this is +8.00 USD above Tuesday's settlement. With some 39.800 deals the traded volume (front month) was on average.

Whilst the technical indicators were all bearish on Wednesday morning, yesterday afternoon's significant upward correction lead to the change in the indicators' bias. The RSI isn't giving any signals at the moment but the lines of the stochastic indicator at the ICE charts have already crossed, which is why the indicator is giving buying signals again. Since the bearish technical cues have all been spent and the stochastic indicator is giving buying signals at the Brent and the Gasoil chart, we assess the technical constellation as slightly bullish. This bullish bias would be reinforced if the lines of the stochastic indicator also cross at the WTI chart. One has to keep in mind, however, that the unstable market fundamentals (Ukraine) have caused the volatility oil markets have seen lately, putting the technical constellation in the background. A renewed decline would quickly neutralize the current buying signals of the stochastic indicator and so the bias of the technical constellation seems but little reliable.

U.S.

Nymex below avarage: Futures at ICE and NYMEX have pulled back from yesterday's highs in electronic trading this morning. The data on US oil inventories released by the API last night slightly weighed on prices but didn't trigger a sharp decline. The traded volume at NYMEX is below average for this time of day. Investors are now eying the development at stock and forex markets. They will also keep a close eye on the situation in Ukraine, Iraq and Libya and today's economic indicators. Moreover, they are looking ahead to the release of the DOE's data on US oil inventories at 5 p.m. this afternoon.

Forecasts: Crude oil -1.0; Distillates -1.2; Gasoline -1.5 million barrels vs previous week.
API: Crude oil -0.5; Distillates +0.4; Gasoline +0.4 million barrels vs previous week.

Houston (ex-wharf indications 4-9)
380cst $580
180cst $655
MGO $959

New Orleans (ex-wharf indications 4-9)
380cst $581
180cst $673
MGO $955

Singapore (delivered indications 4-9)

WTI is gaining with +$1.49 Singapore paper is up with +$4.50 for 180cst and +$4.75 for 380cst for Sep, and for Oct 180 cst +$4.75 and 380cst with +$5.10 with MGO contracts Sep gaining with +$1.37 and in Oct with +$1.36. The cargo market is losing with 180cst -$5.43, 380cst with -$4.73 and MGO with -$1.41.

The Singapore fuel oil prices fell more than -$5.0 during the Asian Platts window. The delivered bunker premiums strengthened to around +$11.0 above cargo prices as sellers were more reluctant to sell on lower outright prices. The market is also experiencing some short term terminal congestion.

380cst $582
180cst $595
MGO $860

Fujairah (delivered indications 4-9)

380cst $608
180cst $633
MGO $980

ARA (Amsterdam - Rotterdam - Antwerp)

Indications for delivered bunkers:
380cst : $564
(1.0 %) : $574
180cst: $594
MGO 0.1%S: $838