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WTI oil futures fell sharply on Wednesday, amid speculation weekly supply data due later in the session will show U.S. crude inventories rose last week.

The technical constellation and market fundamentals were bearish on Tuesday morning. Since the traded volumes were rather low and decisive cues were lacking, oil futures at first remained in a rather narrow range, though. In the afternoon, however, prices surged unexpectedly. They were sent higher by the rise in product futures. NYMEX Heating oil rose particularly sharply. Investors hope that a cold snap in the West of the USA might boost heating oil demand. At the same time, the weather conditions hamper the embarking and transport of oil. Since the NYMEX Heating Oil and Gasoline contracts with delivery in January are going to expire on Thursday, many traders on the physical market try to buy oil in order to prevent possible price increases and regional bottlenecks in supply. However, there weren't many investors who were ready to raise their short-positions, the more so as market players had only tended to cover their short-positions ahead of the prolonged weekend of New Year. Apart from this, investors expected the weekly data on US crude oil inventories to show a draw in US crude oil stockpiles. However, the API's report Tuesday night showed builds in US oil inventories. That is why oil futures have already erased some of Tuesday's gains overnight.

ICE Gasoil contract for January delivery settled at 341.25 USD on Tuesday, this is +5.25 USD below Monday's settlement. With some 40,600 deals, the traded volume (front month) was below average.

The Stochastic indicator has lost some of its bearish impact after Tuesday's price rally. Still, the lines of the indicator remain crossed and haven't converged again. That is why the indicator is still slightly bearish. At the same time, the RSI stays in neutral territory. At the Brent and the WTI chart the Stochastic indicator might even drop below 50% in the course of the day. This would add to selling pressure. Given the still sightly bearish impact of the Stochastic indicator, we assess the technical constellation as neutral to bearish this morning.

U.S.

Nymex is above average: Oil futures stabilised in Asian and electronic trading this morning but have just edged lower again. The traded volume at NYMEX is slightly above average this morning. Market participants are waiting for the European financial and forex markets to open today as well as for the release of some economic indicators. Moreover, the API's report on US oil inventories is due at 10.30 p.m. tonight.

Forecast: Crude oil -1.0; Distillates +1.0; Gasoline +0.8 million barrels vs previous week.
API: Crude oil +2.9; Distillates +2.1; Gasoline +0.5 million barrels vs previous week.

Houston (ex-wharf indications 30-12)
380cst $149
180cst $212
MGO $364

New Orleans (ex-wharf indications 30-12)
380cst $186
180cst $246
MGO $389

Singapore (delivered indications 30-12)

380cst $174
180cst $186
MGO $341

Fujairah (delivered indications 30-12)

380cst $165
180cst $206
MGO $594

ARA (Amsterdam - Rotterdam - Antwerp)

Indications for delivered bunkers:
380cst : $138
MGO 0.1%S: $318