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Oil prices fell sharply in European trade this morning, adding to overnight losses, as a broadly stronger U.S. dollar and an unexpected rise in U.S. crude inventories triggered selling.

Market fundamentals remained bullish Wednesday morning against the backdrop of the wildfires in Canada and the API's bullish data on US oil inventories. Monday and Tuesday's sharp gains prompted investors to take profits, though, the more so as the technical upward potential was all but exhausted. Although the indicators hadn't provided any selling signals, the Stochastic indicator and the RSI moved in overbought territory. Moreover, oil futures traded near the upper Bollinger Bands. Investors thus locked in some profits from their long positions. Ahead of the release of the DOE's data on US oil inventories, oil futures renewedly gained ground. However, the fact that the API's data and the DOE's data diverged last week, caused some insecurity ahead of the release of the DOE's data. The DOE's report contained bullish as well as bearish factors, so oil futures struggled to find a direction, staying on a high level after the release of the data. Oil prices only slumped in the evening, after our office hours. The US Fed released its minutes for the latest FOMC meeting in April. This bolstered the USD, making dollar-denominated oil more expensive for investors outside the USA.

ICE Gasoil contract for June delivery settled at 437.00 USD on Tuesday, this was 11.50 USD above Monday's settlement. With some 96,300 deals, the traded volume (front month) was above average.

The RSI has already dropped below 70% at the Brent chart. Moreover, the lines of the Stochastic indicator have crossed and Brent slipped below the 7-period moving average. These are clear selling signals. At the WTI chart, these selling signals haven't been completely confirmed yet. The 7-period moving average is still intact at the US-crude oil chart and the RSI is still hovering above 70%. The Stochastic indicator is bearish, though.. Oil futures have already dropped below Wednesday's lows, generating more downward potential. Although another selling signal might be triggered at the WTI chart, we already assess the technical constellation as bearish, favoring a test of WTI's 7-period moving average. If WTI drops below this marker and the RSI drops below 70%, WTI might see a correction down to 46.70 or even 46.00 USD.

U.S.

Nymex above average: Oil futures considerably declined during the Asian session and in Globex electronic trading this morning,. The traded volume at NYMEX is above average this morning, with investors already focusing on the July WTI contract. Market players are waiting for the European financial and forex markets to open as well as for news on the situation in Canada. The are also eying to the release of some economic indicators due today. The WTI contract with delivery in June will expire Friday evening.

Forecast: Crude oil -2.4; Distillates -0.8; Gasoline -0.6 million barrels vs previous week.
DOE: Crude oil +1.3; Distillates -3.2; Gasoline -2.5 million barrels vs previous week.
API: Crude oil -1.1; Distillates -2.2; Gasoline -1.9 million barrels vs previous week.

Houston (ex-wharf indications 19-5)
380cst $218
180cst $318
MGO $447

New Orleans (ex-wharf indications 19-5)
380cst $231
180cst $281
MGO $434

Singapore (delivered indications 19-5)

380cst $224
180cst $229
MGO $431

Fujairah (delivered indications 19-5)

380cst $236
180cst $240
MGO $484

ARA (Amsterdam - Rotterdam - Antwerp)

Indications for delivered bunkers:
380cst : $223
MGO 0.1%S: $423