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Technical indicators: neutral to bearish

Oil prices will stay volatile during the day on contradictory comments of a possible OPEC output hike and expectations of a draw in US crude oil and gasoline stocks last week. Investors will still eye the course of the U.S. dollar for direction.

Oil futures lost ground in volatile trading yesterday, WTI crude falling to the lowest in two weeks on speculation that OPEC may rise output quota and a weaker euro/stronger dollar. Only in after-hour trading were supports line breached and technical selling orders triggered.

OPEC: On their next meeting, later this week in Vienna, the cartel is expected to close the gap between current quotas and official production, which stands at about 1.4 million barrels per day. On the other hand, a higher increase in quotas will be hard to push through. Saudi Arabia, the strongest OPEC member, as well as other Gulf countries, would like to see prices lower.

ICE Gasoil contract for June delivery settled at 950.00 dollars Monday night. This was 0.75 dollars below Friday's settlement. Volume with some 46,400 deals below average.

This morning the stochastic indicator for Gasoil, Brent and WTI is slightly bearish, Despite of recent profit taking chart analysts see some downward potential within the price range, whereas the medium-term uptrend remains untouched. Only when prices also breach medium-term supports, a considerable correction downward may be expected, analysts say. The first support for the WTI crude is seen at 98.35 dollars, the first resistance at 100.50 dollars. Brent's first resistance is seen at 116.00 dollars, its first support is at 113.50 dollars.

U.S.

Nymex Access losing. Oil prices edge lower in East Asia and Globex electronic trading this morning, extending Monday's losses on speculation of a possible OPEC output hike. The traded volume is about on average.

Survey of US petroleum inventories due out tonight at 22:30 (API) and Wednesday at 16:30 (DOE):

Crude oil -0.9; distillates +0.4; gasoline +0.4 million barrels vs previous week.

Houston (ex-wharf indications 6-6)

380 cst $663
180 cst $693
MDO $984
v Very tight avails for 180 cst

New Orleans (ex wharf indications 6-6)

380 cst $665
180 cst $696
MDO $987

Singapore (correct as of 1430hrs LT - delivered indications)

Crude is slowing, losing only marginally with -$0.08 Singapore paper is slightly more bullish with +$1.45 for 180 cst and +$1.40 for 380 cst for Jun, and for Jul 180 cst +$2.55 and 380cst +@1.85 with MGO Jun contracts at -$0.44 and for Jul at -$0.45 The cargo market is mirroring paper with 180cst +$2.55 380cst +$1.85 and MGO -$0.45.

The Singapore fuel oil market was down $1.50 -2.00 during the Platts window yesterday tracking softer crude. Market fundamentals continue to look firm as supporting the buying interest and also widening the backwardation curve. The delivered premiums strengthened to around $12.50 above cargo prices yesterday. Both markets are trading slightly higher this morning.

High premiums for prompt deliveries.

380 cst $665
180 cst $676
MDO $963

Fujairah (delivered indications 7-6)

380cst: $657
180cst: $687
MGO: $1026

Rotterdam

Indications for delivered bunkers:

380cst: $629
(1.0%): $669
180cst: $654
(1.0%): $694 (very low avails)
MGO 0.1%S: $959