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Oil rose towards $50 a barrel on Wednesday for the first time in seven months, driven by expectations that shrinking supply will help erode any overhang of unwanted crude, particularly after industry data showed a sharp fall in U.S. inventories.

Oil prices traded lower at ICE and NYMEX on Tuesday morning on a bearish technical movement after the RSI had produced selling signals at the Brent and the WTI charts. At mid-session prices tried in vain to breach their Monday's lows, the ongoing strikes in France, the production outages in Nigeria and the expectations of a draw in U.S. crude stocks limiting the losses. When there was no news on when the oil sand production in Canada will be fully restored, traders opted for some short covering, driving prices up despite the rise of the U.S. dollar vs the euro that is trading in a downtrend. When the API, at 10.30 p.m., released its weekly report showing a draw in U.S. crude and distillate product stocks, the gasoil contract at the ICE hat a fresh year high and WTI and Brent settled at their highs of the day. Only the gasoline futures at the NYMEX lost some ground due to the unexpected draw in stocks.

ICE Gasoil contract for June delivery settled at 447.25 USD on Tuesday, this was 8.50 USD above Monday's settlement. With some 59,600 deals, the traded volume (front month) was above average.

If the RSI on Tuesday had triggered selling signals its bearish influence has meanwhile diminished. The Stochastic indicator even produced a buying signal at the Brent and the WTI chart upon the crossing of its two lines. The oil futures last night settled above their MA7's, thus reducing the probability of a test of the MA21 lines. What's more, oil's strong rise on Tuesday opened fresh upside and the Stochastic's buying signals indicate un upward correction. We therefore consider the technical constellation as bullish this morning and would like to point out that the Brent and the WTI might well hit their year highs of last week.

U.S.

Nymex above average: Oil futures are holding at their high level in East Asia and NYMEX electronic trading this morning after Tuesday's strong gains, having already risen above their Tuesday's highs. The traded volume at NYMEX is about on average this morning. Market participants are waiting for the European financial and forex markets to open, for the release of a few economic indicators and of the DoE's official data on U.S. petroleum stocks. They will also scrutinize any news on the situation in Canada and Nigeria and the strike in France.

Forecast: Crude oil -2.5; Distillates -0.8; Gasoline -1.5 million barrels vs previous week.
API: Crude oil -5.1; Distillates -2.9; Gasoline +3.6 million barrels vs previous week.

Houston (ex-wharf indications 25-5)
380cst $217
180cst $316
MGO $450

New Orleans (ex-wharf indications 25-5)
380cst $227
180cst $272
MGO $430

Singapore (delivered indications 25-5)

380cst $223
180cst $229
MGO $429

Fujairah (delivered indications 25-5)

380cst $237
180cst $244
MGO $489

ARA (Amsterdam - Rotterdam - Antwerp)

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