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Trends

Rotterdam (ARA) fuel oil - Trading USD 5 higher

Singapore fuel oil - Trading USD 15 higher

US Gulf - Expected to open USD 2 higher

Market optimism supports upward momentum

Investor confidence strengthened on various grounds, causing a broad market rally in equities and commodities yesterday. Stress test methodology disclosure for European banks, expectations of strong Q2 earnings for US companies, better-than-expected US chain store sales and larger-than-expected crude oil inventory draw were the leading reasons for the 3% increase in WTI and Brent.

Germany leading EU
German imports rose much more than exports, bringing the country's trade balance down to 10.6 billion euros from 13.1 billion euros. A rise in German exports coupled with a larger rise in their imports is exactly what Eurozone needs at the time. Keeping the EU economy alive by exporting and increasing public spending by importing, Germany will be able to grease the gears of economy.

EIA revises oil demand growth upwards

US Energy Department increased its growth estimate of global oil demand by 1.5 million bpd for the second half of 2010 and 2011. EIA weekly oil inventory data is due 16:30pm today.

Today's important numbers include British and German manufacturing/industrial outputs, ECB interest rate decision, US initial and contingent jobless claims as well as US consumer credit.

Recommendation

Technically, prices moved into $73-76/barrel range. EIA data confirming a large inventory draw can solidify $73 mark as a short-term support while a weak dollar and market optimism push prices higher towards $78/barrel. We are still below half-way mark of $70-80/barrel trading range and recommend hedging future exposure at current levels.

Release: API oil data (Consensus)

* Crude: -7,260,000 barrels (-2,300,000)
* Distillates: -1,021,000 barrels (1,400,000)
* Gasoline: -191,000 barrels (-200,000)
* Refinery utilization: -0.2% (unchanged)