london (Platts)--29Jan2008

Global crude futures moved higher in European morning trading on Tuesday,
hovering around the $91/barrel mark, as expectations that the US Federal
Reserve Bank could cut rates again on Wednesday lent support to equity
markets, which in turn filtered through into the petroleum complex, sources
said.
In late-Monday trading, US equity markets reversed to the upside with
traders expecting another rate cut at this week's Federal Reserve Bank
meeting.
Fed Fund futures markets on CME were pricing in an 88% probability of a
50-basis point rate cut, following last week's sudden 75-basis point slash in
the target rate for overnight bank funds. In addition, the US dollar slipped
lower as well, also on rate cut expectations.
At 10:55 GMT, front-month ICE Brent futures increased 45 cents to
$91.83/b, managing to hold a 53 cents/b premium to March NYMEX WTI, which was
seen up 31 cents to $91.30/b.
"Petroleum futures markets are once again driven by equities, which are
holding the market up...However, the Dow Jones index is only 10 points up, so
we may see the US selling this market off later on," a London-based broker
said.
"My feeling is that even though it was a one-off, the losses at SocGen
will have an impact in the banking sector, therefore the economy and also the
oil markets...the sentiment is still bearish and economic data will be the
key," the broker added, referring to last week's news that a trader at French
bank Societe Generale had lost billions of euros in bad trades.
Analysts also said that the lack of fundamental headlines is mainly
responsible for the strong correlation between crude futures and financial
markets.
"With little strong new fundamental news and lack of new disruptions, the
correlation of WTI to equities remains exceptionally high and as the intra-day
volatility is increasing on equities, the big red or big green printed on Wall
Street becomes an increasing sentiment driver for oil," analysts for
Petromatrix said in a report Tuesday.
However, some fundamentals may return to oil markets later this week in
the shape of the latest US weekly oil stock data, as well as the OPEC meeting
Friday in Vienna.
OPEC ministers will meet Friday in the Austrian capital to decide whether
to change current output targets, currently set at 29.673 million b/d for 12
members--Iraq. Major consuming countries, in particular the US, have called
for more oil supply to help ease concerns about economic recession. The main
message from OPEC in the run-up to the meeting has been that oil markets are
adequately supplied with crude and that there is no need for an output
increase.
Looking at product futures, front-month ICE gasoil futures were very
strong in morning trading on Tuesday, catching up with late-Monday crude
gains, increasing $14.25 to $809.50/mt.
In the US, February NYMEX heating oil and RBOB gained 0.6 cent and 0.55
cent to $2.5325/gal and $2.3308/gal, respectively.
--Verena Peternell, verena_peternell@platts.com