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Technical indicators: neutral immediate term / neutral to bullish medium term

Oil prices hovered near $88 a barrel this morning, with losses tempered by hopes of strong growth in demand for crude and Europe's progress in containing its debt crisis. Oil prices are declining now after bearish economic data from the USA. Unemployment rate rose by 0.2% and the nonform payrolls of last moth were expected to be much higher. Equities and the US dollar declining further.

Yesterday, oil prices kept rising in late New York trading, NYMEX crude oil heading for its biggest weekly gain in a month and closing the highest in two years on speculation that U.S. fuel demand will increase as the economic recovery gathers pace in the USA, following a slew of upbeat U.S. economic data and ahead of today's employment report that is expected to show employment expanded for a second straight month in November.

For the first time in two years, Brent crude is back above 90 dollars. The surge, amid freezing temperatures in Europe and rebounding economic growth after the summer weakness, puts Opec in a dilemma just a week ahead of its meeting. Until recently, most Opec officials had suggested the group leave its official output levels unchanged for the time being. But the rise in prices might force Opec to act or, at the very least, acknowledge rising price expectations.

Oil demand is growing faster than even the most bullish traders and analysts had expected only a couple of months ago. The IEA, forecasts a rise this year of 2.3m barrels a day, the second-biggest annual increase in more than 30 years. The IEA is likely to revise its forecast higher when it releases its final update of the year on December 10.

ICE gasoil December is expected to open 4.00 to 5.50 dollars up at about 755.25 dollars/ton after settling at 750.50 dollars (official settlement price) Thursday night. This was 15.75 dollars above Wednesday's settlement. Volume with some 41,200 deals below average.

Oil prices breached more resistance lines Thursday, ending up in overbought territory, a signal for a downward correction. However, markets are currently dominated by the fundamentals and technical aspects are secondary. Still, the crude oil chart shows the development of a double-top formation, which would be a clear sign for a sudden and hefty price collapse. The first support for the WTI crude is seen at 86.25 dollars today, the first resistance at 88.00 dollars.

U.S.

Nymex Access : Oil prices are steady in Asian trading hours and NYMEX electronic trading this morning, taking their breath after Thursday's gains. WTI crude is trading near 25-month highs, just short of 88.00 dollars for a barrel. No news in the markets. The traded volume is above average.

Houston (ex-wharf indications 2-12)

380cst: $487
180cst: $508
MGO: $773

Very tight avails for 180cst

New Orleans (ex-wharf indications 2-12)

380cst: $490
180cst: $511
MGO: $776

Singapore (correct as of 1430hrs local time)

Crude is bullish still with WTI +$0.85. Singapore paper is cooling somewhat with 180cst +$3.75 and 380cst +$4.01 for Dec, and Jan 180 cst +$3.55 and 380cst +$3.21 with MGO Dec contracts +$1.60 and for Jan at +$1.42. The cargo market is starting to react to the bullishness with 180cst +$9.10, 380cst +$8.92 and MGO +$2.52.

Asian fuel oil's time spread shot to a 13-month high above $2/mt on Thursday, lifted by active buying by China's Brightoil for a second straight session. It is hard to justify such a deep backwardation on the front from pure fundamentals. Swap spreads for Bal Dec/Jan is value at +2,50 from +1,75 yesterday window. The strong paper market reflects end-of-the-year physical restocking by the trading houses, and we think physical traders will continue their bull play into Jan/Feb. Reflecting the tight market, Singapore fuel oil inventories fell to a two-week low of 20.4 million barrels (3.14 million tones), down 2.47 million barrels, for the week ended Dec. 1, official data show.

High premiums for prompt deliveries:

380cst: $506
180cst: $516
MGO: $763

Fujairah(delivered indications 3/12)

380cst: $505
180cst: $536
MGO: $770

Rotterdam

Yesterday (Only barge trade deals of >2 KT reported) 106KT was traded between 475.00-477.50 with Litasco and Petroned as the main sellers to Gunvor and Cargill as the main buyers.

The NWE HSFO markets continue to firm, but the Eastern arbitrage is now considered to be break even only. On the back of many fixtures this week; six VLCC's were reported fixed yesterday, the markets have to find out how this influx will be absorbed in Singapore. The HSFO Med markets are oversupplied and sluggish, with cargoes to NWE starting to become more attractive. For the LSFO there are some cargoes seen moved from NWE to the Med, although the arbitrage is not considered to be open yet. The NWE LSFO markets are well supplied, with stored product entering the market and product arriving out of the US.

380cst: $486
(1.0%): $502
180cst: $499
(1.0%): $515
DMB: N/A
MGO 0.1%S: $765