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Crude futures hover above $107 a barrel this morning, with investors looking ahead to a U.S. supply report expected to show a drop in crude stocks and with Iranian threats to halt a vital oil trade underpinning the markets.

After Tuesday's price rally oil futures traded slightly lower at ICE and NYMEX Wednesday morning. The WTI crude's support at 100.65 dollars and the ICE Brent's support at 108.25 dollars remained strong until the afternoon, however, limiting the downward potential. After the auction of Italian bonds trade - up to then rather calm - saw some movement. The auction proved to be better than expected but still, yields for 10-year bonds remained near the crucial mark of 7%. The ECB's injection of liquidity last week seemed only to have had a positive effect on bonds with a shorter due date up to now. Market participants thus fear that today's auction of Italian bonds with a longer due date might not be that successful and fled from the euro to the US dollar, generally considered a "safe haven" currency. The euro thus plummeted later in the afternoon, marking a new 11-month low. Investors likewise took profit at stock and oil markets, all settling near their lows yesterday.

ICE Gasoil contract for January delivery settled at 918.25 dollars on Wednesday. This was -6.25 dollars above Tuesday's settlement. With some 32,000 contracts the traded volume was far below average.

The stochastic indicator is to be interpreted as bearish this morning, whereas the RSI being on an overbought level does not yet give any signal to the markets. Yesterday's correction down has reduced much of the downward potential. Technical analysts thus assess the situation as neutral, expecting new selling impulsions only if oil futures fall below yesterday's lows. Analysts also draw attention to fundamental factors as the USinventories data and the auction of Italian bonds, which might provide for decisive impulsions in the course of the day. The WTI Crude's first support is seen at 99.00 dollars today, its first resistance at 101.70 dollars. The Brent's first support is seen at 106.85 dollars, its first resistance at 109.50 dollars.

U.S.

Nymex acces gaining. Oil futures trade nearly unchanged in East Asiaand on Globex electronic trading platform this morning. ICE Brent and Gasoil edge higher in the morning while NYMEX futures trade sideways in a narrow range. The traded volume is far below average. Market participants eye the opening of European markets, the auction of Italian 10-year bonds and the DOE's oil inventories data, to be published this afternoon at 5.00 p.m.

API's: Crude oil +9.6; distillates +0.6; gasoline +1.9 million barrels vs previous week. Refinery utilization +0.2%
DOE's; due out tonight
Forecasts: Crude oil -2.9; distillates -1.3; gasoline -0.9 million barrels vs previous week

Houston (ex-wharf indications 28-12)

380cst $640
180cst $676
MGO $955

Very tight avails for 180 cst

New Orleans (ex-wharf indications 28-12)

380cst $643
180cst $678
MGO $959

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

Crude is bouncing back up with WTI +$1.46. Singapore paper is reacting, gaining with +$2.25 for 180cst and +$4.00 for 380cst for Jan, and for Feb 180 cst +$2.30 and 380cst +$3.95 with MGO Jan contracts at +$0.22 and for Feb +$0.21. The cargo market is not yet reacting, losing only slightly with 180cst -$0.99, 380cst -$0.36 and MGO -$1.00.

The Singapore fuel oil markets edged up between +$1.5 to +$3.5 during the Platts window yesterday. The delivered bunker premiums maintained around $22.0 above cargo prices. Bunker fuel oil swaps gained a few dollars at the front and lost up to $4/mt at the back end of the forward curve both for Singapore and Rotterdam papers. East/ West spread broadened even more trading around $49 for January. Viscosity spread between 180cst and 380cst papers has narrowed, trading at app. $11/mt for January. This morning both markets are trading higher.

High premiums for prompt deliveries.

380 cst $676
180 cst $687
MGO $940

ARA (Amsterdam - Rotterdam - Antwerp)

Weaker 3.5% Fob Rotterdam barges and thin demand in Northwest Europeduring the morning hours of the last trading day before Christmas has put some pressure on the bunker prices. Rotterdam and Antwerp continued to report high and low sulfur fuel oil supplies for prompt due some VLCCs fixtures this week.

Rotterdam

Indications for delivered bunkers:

380cst : $ 621
(1.0 %) :$ 667
180cst: $ 638
(1.0 %):$ 686
MGO 0.1%S: $925