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Oil prices are extending higher this morning supported by rising tensions in the Middle East following news that a number of senior Syrian officials were killed yesterday in a bomb attack in Damascus. followed by a separate incident in Bulgaria which resulted in the death of six Israeli's. There are growing fears over the situation in Syria where the fighting is now extending right to the heart of the government base in Damascus. With Israel blaming Iran for the attack in Bulgaria, tensions are also rising with the Iranian's threatening to block the Straits of Hormuz. Yesterday the US Defence Sec. said the US would defeat the Iranian's if they attempted to block the key shipping channel.

Oil prices at ICE and NYMEX already showed a steady tendency on Wednesday morning. Slightly positive data regarding the US housing market and the strong performance of equities added to the bullish tone of the fundamental factors. Thus first resistance lines were already breached before the release of the DOE's data on US oil inventories. Shortly after the data were published, oil prices renewedly surged. The second part of Fed chairman Ben Bernanke's testimony took until late in the evening but provided no new cues. Oil market's steady tendency remained until late at night and so oil futures settled near their highs.

ICE Gasoil contract for August delivery settled at 906.25 dollars on Wednesday. This was 11.75 dollars above Tuesday's settlement. With some 49,600 contracts the traded volume was below average.

OPEC: According to the „Gulf Oil Review“, Saudi Arabia has considerably increased its production in June. While the OPEC figured its output at some 10.1 million bpd in its last monthly energy report, the seperate report presumes that the kingdoms output stands at some 10.3 million bpd. This would be a rise of 455,000 barrels per day compared to May. Currently, Saudi Arabia's output is said to be at 10 million bpd. Only yesterday, the president of the OPEC, Abdul Kareem Luaiby, said he hoped that the members of the cartel abide by the agreed production ceiling of 30 million barrels per day. This seems hardly possible however, if Saudi Arabia does not cut its output significantly.

After the RSI has breached the 70%-line oil markets are considerably overbought. Even though new signals have not been created, supports and resistances indicate that the rise will continue. The overbought situation favors downward corrections, however the corresponding technical selling signals are still lacking. These will only develop if the stochastic's lines cross or the RSI falls through the 70%-line.

U.S.

Nymex access gaining: Oil futures have edged higher in Asian trading and on Globex electronic trading platform this morning extending yesterday's gains supported by the positive performance of Asian equities. The traded volume is far above average. Market players now eye equities and forex markets as well as today's economic indicators.

API's: Crude oil -2.0; distillates +3.4; gasoline -0.1 million barrels vs previous week. Refinery utilization -1.5%
DOE's; Crude oil -0.8; distillates +2.6; gasoline -1.8 million barrels vs previous week. Refinery utilization -0.7%
Forecasts: Crude oil -1.1; distillates +1.3; gasoline +0.8 million barrels vs previous week.

Houston (ex-wharf indications 18-7)

380cst $613
180cst $638
MGO $965

New Orleans (ex-wharf indications 18-7)

380cst $610
180cst $634
MGO $955

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

Crude is gaining bullish momentum with WTI +$1.57. Singapore paper is reacting with +$11.85 for 180cst and +$12.30 for 380cst for Aug, and for Sep 180 cst +$11.80 and 380cst +$12.35 with MGO contracts Aug +$2.62 and Sep +$2.48. The cargo market less bullish, gaining with 180cst +$0.64, 380cst +$0.94 and MGO +$0.49.

The Singapore fuel oil market prices inched up gaining approx. $0.5/mt at the Platts window. The Asian fuel oil cracks widened again yesterday. The incoming July cargo volume is estimated to equal 3.0 to 3.5 million mt while August arbitrage is calculated at 2.5 - 3.0 million mt. The delivered bunker premiums softened to approx. $7.50/mt above cargo prices yesterday. Bunker fuel swaps were strongly up yesterday with a slightly different dynamic in Europe and Asia. Front month was assessed up by almost $12/mt. Forward prices were even stronger gaining a few cents more than August papers. Markets continue moving up this morning.

High premiums for prompt deliveries.

380 cst $625
180 cst $638
MGO $890

ARA (Amsterdam - Rotterdam - Antwerp)

Both hsfo and lsfo are still bullish, tracking Brent. Continuing loading delays, cutter stock shortages and arbitrage loadings reported. High premiums are charged for prompt enquiries.

Rotterdam

Indications for delivered bunkers:

380cst : $ 614
(1.0 %) :$ 665
180cst: $ 640
(1.0 %):$ 703
MGO 0.1%S: $915