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Oil futures fell this morning, after a surprise rise in U.S. inventories wiped out the optimism that had built up the day before over the potential for the world's largest exporters to cut output enough to stem a 19-month-long price slide.

Oil futures edged lower on Tuesday morning weighed down by the rather bearish market fundamentals and the technical constellation. Monday's losses had already put an end to last week's technical rally and when oil futures broke below Monday's low, fresh downward potential was generated. The renewed slump in Chinese stock markets also put oil futures under pressure. Around noon, oil prices no longer tested their downside, though. Futures were able to recover, with Brent and WTI climbing back above 30 USD. The Iraqi oil minister's comments caused speculations over a possible cut in OPEC and non-OPEC output. The minister had said that he saw some "flexibility" for a deal between Russia and Saudi Arabia. However, Kuwait's oil minister defended the cartel's output strategy. Moreover, the state-run oil major Saudi Aramco doesn't seem to be considering any change in its production policy. In the course of the day, oil futures at ICE and NYMEX gained ground on speculations, seizing the technical upward potential provided by the consolidation. Late in the evening oil futures posted fresh highs but Monday's highs remained unreachable. Moreover, Brent's 21-period moving average limited the bullish potential. The API's report on US oil inventories put oil futures under pressure over night but oil futures still settled with gains.

ICE Gasoil contract for February delivery settled at 282.75 USD on Tuesday, this is 5.50 USD above Monday's settlement. With some 67,700 deals, the traded volume (front month) was above average.

The lines of the Stochastic indicator have converged at the WTI and the Brent chart. At the US crude oil chart, the lines of the indicator have even crossed. However, the black line hasn't dropped clearly enough below the red line yet and so, this can't be interpreted as a selling signal yet. The 21-period moving average is still limiting the upward potential at the Brent chart whereas WTI isn't even close to this marker. From a technical perspective, Tuesday's price increase is normal in the phase of consolidation which usually follows a technical price rally. Currently, there are no indications leading to expect that the consolidation is already over. If the lines of the Stochastic indicator sustainably cross, though, selling pressure would increase. This might push oil futures below the trend of the consolidation, generating a new short-term downtrend. Upward potential rather depends on the 21-period moving average. If oil futures sustainably break above this marker, more upward potential would be generated. Since there aren't any clear cues yet, we assess the technical constellation as neutral.

U.S.

Nymex above average: After a light recovery in early electronic trading this morning, oil futures have meanwhile edged lower again weighed down by the API's data on US petroleum stockpiles. The traded volume at NYMEX is far above average this morning. Investors are now waiting for the European financial and forex markets to open as well as on the economic indicators due today. This afternoon at 4.30 p.m., the DOE will release official data on US oil inventories.

Forecast: Crude oil +3.3; Distillates -1.9; Gasoline +1.1 million barrels vs previous week.
API: Crude oil +11.4; Distillates -0.6; Gasoline +4.1 million barrels vs previous week.

Houston (ex-wharf indications 27-1)
380cst $133
180cst $208
MGO $332

New Orleans (ex-wharf indications 27-1)
380cst $143
180cst $192
MGO $336

Singapore (delivered indications 27-1)

Brent is up with +$1.78 for Apr contracts. Singapore paper bullish with +$3.75 for 180cst with +$5.00 for 380cst for Feb, and for Mar 180cst +$5.50 and 380cst with +$5.50 with MGO contracts Feb with +$1.95 and in Mar with +$2.00 .The cargo market is bullish with 180cst -$13.16, 380cst with -$12.74 and MGO with -$2.70.

380cst $158
180cst $167
MGO $264

Fujairah (delivered indications 27-1)

380cst $149
180cst $161
MGO $449

ARA (Amsterdam - Rotterdam - Antwerp)

Indications for delivered bunkers:
380cst : $138
MGO 0.1%S: $268