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In the course of Monday morning, traders at ICE and NYMEX were cautious to engage in new short positions since they wanted to wait for the results from nuke talks with Iran in Kazakhstan and for the DoE data. First short-term support levels proved to be strong and investors seized the euro’s rise to cover short positions. However, resistances at 113.30 USD (Brent), at 93.00 USD (WTI) and at 962.50 USD (G.Oil) could not be sustainably breached at this point. When first information leaked from the meeting in Almaty, Kazakhstan, oil futures traded down again. Although negotiations between the P5+1 group and Iran did not end with concrete results the two parties could at least agree on meeting again in March and April. Economic data took a backseat yesterday as market participants were focusing on the DoE oil inventories. Even though the figures were difficult to interpret at first glance, on a closer inspection they are clearly bearish, which increased selling pressured in the late afternoon. The neutral to bearish technical constellation favoured the downtrend and oil prices breached support levels, triggering more technical selling orders. Merely WTI traded opposite to the general development at the oil market, closing in the black, while the remaining futures at ICE and NYMEX closed with considerable losses.

The stochastic oscillator is neutral again at the Brent chart while it is still slightly bearish for G.Oil. The RSI as well as the Stochastic indicate an oversold market situation at both charts, which will only make an impact if decisive buying signals are triggered. The Stochastic at the WTI chart has turned bullish, giving off a buying signal at the oversold level, see also technical analysis. As WTI is currently trading opposite to the other futures as traders liquidate their spread bets, we neglect this tendency this morning. Thus, we assess the technical analysis with regard to the ICE and therefore take a neutral stance. But if Brent and G.Oil breached yesterday’s lows, bearish signals would be set off.

Although the build in crude stocks was not as high as expected, given the increased refinery runs, demand for crude also increased more than expected and thus, the small build is not necessarily a bullish signal. Demand for distillates dropped by 0.306 mbpd, which lead to an unexpected build in face of higher capacities at refineries. In contrast, demand for gasoline rose by 0.160 mbpd and exports also increased by 0.108 mbpd in the reported week, which higher refinery runs could not make up for and consequently, gasoline inventories declined stronger than anticipated. With a closer look to the individual regions, however, it becomes apparent that the draw was predominantly recorded at the well-supplied Gulf coast. At the East Coast, where there recently were supply shortages, inventories slightly recovered. Contrary to the nationwide tendency, gasoline stock increased from 59.5 to 59.8 million barrel here. Bottom line, traders consider the DoE data as rather bearish although it is not immediately obvious if you only look at the mere change in stocks.

Yesterday’s DoE report showed that gasoline inventories in the USA are is becoming more balanced and the East Coast is gradually getting better supplied. After hurricane Sandy last autumn, gasoline stocks had dropped by 19.3% compared to the previous year.

However, since mid-December inventories have recovered and rose by 35%, which is the highest level since March last year. Given the price rally of gasoline futures at the beginning of the year, which drove up the entire oil market, the market will lose this supportive effect as stocks becoming more equally distributed.

NYMEX heating oil and gasoline contracts for March delivery expire today. Market particpants increasingly liquidate their long positions as the front month change also entails switchting from winter to summer fuel. As a result, the contract for April delivery is clearly trading with a stronger tendency and is about 8% above the price for March contracts. Analysts expect that this will keep up market volatility until the weekend.

ICE Gasoil contract for March delivery settled at 944.25 USD on Wednesday. This was 12.50 USD below Tuesday's settlement. With some 47,00 deals the traded volume was slightly below average.

U.S.

Brent and G.Oil tested yesterday’s lows early this morning while WTI was still trading with a strong tendency. However, the American crude has traded down by now. The traded volume at NYMEX is clearly about average for this time of day. Market participants are waiting for the European markets to open, for signals from forex trading and for a series of economic data.

Houston (ex-wharf indications 27-02)
380cst $620
180cst $688
MGO $1019

New Orleans (ex-wharf indications 27-02)
380cst $621
180cst $685
MGO $1018

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

In Singapore, demand for delivered bunker fuel had improved, said sellers. In contrast, demand in the ex-wharf sector was slower, with bids for the ex-wharf 380 CST grade seen around $636/mt. Offers were between $637/mt and $640/mt, similar to Tuesday. Trades were heard done around $636.50-637/mt. The ex-wharf 380 CST was assessed at $636.75/mt, down 25 cents/mt from Tuesday. For the ex-wharf 500 CST grade, offers were seen at $630/mt, and some traders had no bunker fuel to supply. The ex-wharf 500 CST was assessed at $629.50/mt, up $1/mt from Tuesday.

High premiums for prompt deliveries.
380 cst $639
180 cst $646
MGO $970

ARA (Amsterdam - Rotterdam - Antwerp)

The Northwest European bunker fuel oil prices remained largely unchanged yesterday. Delivered 380cst product in Rotterdam was assessed app.$1/mt down. Lsfo avails in the port remain tight, with majority of suppliers fully booked until next week. The Singapore fuel oil market reported mixed closing yesterday. The 180cst cargo price was down -$1.42 while the 380cst cargo price rose by +$0.76 during the morning Platts window. The Asian Fuel Oil crack weakened after previous strength. The delivered bunker premiums were around $4.0 to $6.0 above cargo prices. This morning both markets are trading slightly higher.

Indications for delivered bunkers:
380cst : $ 617
(1.0 %) :$ 655
180cst: $ 647
(1.0 %):$ 685
MGO 0.1%S: $ 930