---

Oil futures continued sliding on Friday, with the market having already seen significant profit taking in the morning. The Chinese PMI sunk compared to the previous month, weighing on financial markets at the beginning of the session. In the wake of retreating equities and a softer euro, which marked a 22-month low after its first resistance had remained strong, oil futures breached first supports at ICE and NYMEX. The technical selling pressure that was then created reinforced the downward movement. The bearish constellation in general (fundamental as well as technical) also nourished this slide. In the afternoon, weaker than expected US economic data added to the bearish tone. Only the euro's surge kept prices from falling even lower. Still, oil futures marked new lows during late trade and they have been unable to recover as of now.

The stochastic indicator remains bearish at ICE and NYMEX charts this morning. The indicators signal an increasingly oversold situation that might prompt prices to rise on the short term, according to technical analysts. After quotations have dropped below their midterm down-trends last week, there were new selling impulsions that lead to massive profit taking. Oil futures have thus formed a new sharper trend channel down.

ICE Gasoil contract for June delivery settled at 847,75 dollars on Friday. This was 23.00 dollars below Thursday's settlement. With some 55,000 contracts the traded volume was on average.

According to an independent analysis, the OPEC has produced slightly less crude oil in May than in April. The organisation's output has sunk to 31.65 mbpd in May, down from 31.82 mbpd a month earlier. Although Saudi Arabia has raised its production by some 100,000 barrels per day to an average of 10.5 mbpd, this could not completely balance the production losses in Irak, Iran, Lybia and Angola. The Iran is to produce some 3.15 mbpd currently - 320,000 barrels less than in February. Despite of the retreat, the OPEC currently produces far more than the quota of 30 mbpd which it set for itself. Thus the oversupply of the market, which is estimated at 1.3 to 1.5 mbpd, continues.

Given the weak economic performances of China, the USA and Europe, the still unresolved debt crisis, increasing oil stocks, a weaker demand and the OPEC's continuing overproduction, market sentiment remains bearish and leads to expect that oil prices are unlikely to recover sustainably within the next few weeks. There are some factors that might develop a bullish impact, however, like the EU's oil embargo against the Iran, the expected increase in demand in the second semester, the OPEC meeting on June 14 and the negociations regarding Iran's nuclear program (in case the talks do not lead to any solutions). If these factors do not occur, the bearish tone will predominate, however.

• EU manufacturing PPI: ±0.0% in April (previous month: +0.5%; forecast: +0.2%).

U.S.

Nymex access losing: Oil futures continued to retreat in Asian trading and on Globex electronic trading platform this morning. Investors remained cautious at the beginning of the week, seeing little potential for oil futures to recover given last week's feable economic indicators. Quotations thus follow their sharp down trend, marking new long-time-lows in the early hours of trade. The traded volume is clearly above average. Investors will eye stock and forex markets and today's economic indicators.

Houston (ex-wharf indications 4-6)

380cst $575
180cst $611
MGO $895

New Orleans (ex-wharf indications 4-6)

380cst $578
180cst $615
MGO $899

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

Crude is dropping like a stone with -$3.60. Singapore paper is tracking crude with -$28.00 for 180cst and -$28.85 for 380cst for Jun, and for Jul 180 cst -$26.30 and 380cst -$26.10 with MGO contracts Jun -$3.05 and Jul -$3.04. The cargo market is following with 180cst -$12.57, 380cst -$11.03 and MGO -$1.42.

The Singapore fuel oil markets fell by more than -$18.5/mt during the morning Platts window last Friday as crude plummeted. The delivered bunker premiums were lower at around $6.25 above cargo prices as crude continued to soften after the window. Bunker fuel oil swaps lost nearly $24/mt at the front of the forward curve both for Rotterdam and Singapore papers. Backend was a few dollars stronger.

High premiums for prompt deliveries.

380 cst $575
180 cst $580
MGO $820

Fujairah (delivered indications 4-6)

380cst $600
180cst $625
MGO $1000

ARA (Amsterdam - Rotterdam - Antwerp)

Prices were coming off in Northwest Europe tracking the collapsing crude values, with crude futures shedding more than $3/b Friday. Buying was thin in many ports, only the customer who needs urgent bunkers is fixing today, with all others holding off as long as possible. In Rotterdam, many suppliers were reported to be fully booked until early next week, resulting in tight prompt availability.

Rotterdam

Indications for delivered bunkers:

380cst : $ 562
(1.0 %) :$ 612
180cst: $ 600
(1.0 %):$ 635
MGO 0.1%S: $835