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Market fundamentals were neutral on Friday morning. The technical constellation indicated some downside and so oil futures edged lower. The gains oil futures had posted over the past few days prompted investors to take some profits. Even so, oil futures didn't see any sharp price slump ahead of the weekend. In the early hours of US trading oil futures even gained considerable ground, with Gasoil renewedly testing the 400 USD-mark unsuccessfully. Brent and WTI also failed to break above Thursday's highs. In the evening oil futures shed most of their gains but, nonetheless, they ended the day in the black. Oil prices rose this morning, heading for a third straight week of gains as market sentiment turned more upbeat despite persistent oversupply. Moreover, there is a divergence between the Stochastic indicator and the development of the WTI, the Gasoil and the Brent chart. This leads to expect that the upward movement won't continue, favoring tests of the downside. WTI has already dropped below Friday's low, generating more downward potential. That is why we assess the technical constellation as bearish, pointing to tests of the 7-period moving average. If oil futures drop below this marker, further stop-loss selling orders might be triggered.

The RSI had already given off a selling signal at the Brent and the WTI chart last week. This selling signal has meanwhile been confirmed at the Gasoil chart as the indicator has dropped back below 70%. The lines of the Stochastic indicator have crossed both at the ICE as well as at the NYMEX charts, providing additional selling signals.

ICE Gasoil contract for May delivery settled at 395.75 USD on Friday, this was 2.50 USD above Thursday's settlement. With some 41,200 deals, the traded volume (front month) was below average.

The production outages in Nigeria, in Iraq and in the North Sea supported oil prices at ICE and NYMEX last week after the meeting of important oil producers in Doha has not brought about the expected results. But there is oil hitting the market from elsewhere. Despite the still tense situation in Libya where two governments are fighting for predominance in spite of the efforts of the United Nations to form a unity government, the National Oil Corporation in the East is said having sold its first cargo of about 650.000 barrels heading for Malta. U.S. oil producers are now taking advantage of the situation, hedging the current high price level by selling their future production already now. This weighs on spot prices and prevents prices from rising further. This trend could keep weighing on the oil market for a while longer. Analysts reckon that some U.S. oil wells that have not yet been developed will become profitable as soon as the price for a barrel of crude hits 45 USD. The future production of these wells could also be hedged (sold in advance on the futures market), meaning U.S. production would drop less quickly than expected. If the WTI front month currently sells at 43.10 USD, October contracts are traded above 45 USD for a barrel. Energen Corp., a U.S. oil company, hedged almost half of its 2016 production (about 6 million barrels) at about 45 USD for a barrel thanks to the current Contango constellation at the oil market (futures are traded higher than the front month on the spot market). EV Energy Partners LP is one more company that has already hedged its future production. But apart from companies trading physical oil other market participants could also tend to take some profit, analysts say. As non-OPEC production will drop and demand is seen rising, Bernstein Research experts believe that the oil market will be balanced still this year. But most experts, among them the analysts of IEA and EIA, as well as OPEC members, do not expect that a balance of supply and demand will be achieved before mid 2017. China's oil demand this year has been quite high despite the slowdown in economic growth. In February China imported a record of more than 8 mbd. In March, imports stood at 7.7 mbd, exceeding year-ago figures by about 13 percent. Observers say that currently about 83 very large crude carriers are on their way to China, a number last seen in 2014, carrying about 166 million barrels of crude, averaging about 4.0 mbd of imports. China in the first quarter of 2016 imported more crude oil than needed, filling up its strategical reserves.

U.S.

Nymex above average: Oil futures retreated in Asian trading this morning, partly dropping below Friday's lows. In Globex electronic trading they regained some ground. The traded volume at NYMEX is far above average this morning. Market participants are waiting for the European financial and forex markets to open as well as for the few economic indicators due today.

Houston (ex-wharf indications 25-4)
380cst $169.50
180cst $292
MGO $393

New Orleans (ex-wharf indications 25-4)
380cst $190
180cst $234.50
MGO $389

Singapore (delivered indications 25-4)

Brent is unchanged currently. Singapore paper is up with +$0.45 for 180cst with -$0.55 for 380cst for May, and for June 180cst +$0.70 and 380cst with -$0.50 with MGO contracts May with -$0.21 and in June with -$0.20. The cargo market is now losing with 180cst -$2.54, 380cst with -$2.57 and MGO with -$0.60

380cst $204
180cst $210
MGO $359

Fujairah (delivered indications 25-4)

380cst $204
180cst $211
MGO $429

ARA (Amsterdam - Rotterdam - Antwerp)

Indications for delivered bunkers:
380cst : $182
MGO 0.1%S: $375