(ChinaOilWeb,Sept 19, 2006) High-sulfur fuel oil futures on the Shanghai Futures Exchange settled higher Tuesday, spurred by an overnight rebound in crude oil futures.

But "the upside room for fuel oil will likely be limited, as it's uncertain that crude will continue the rebound in the coming days," said Ming Xiaochong, an analyst with Yong'an Futures.

The benchmark December contract opened higher at CNY3,160/ton, but trimmed its gains to a low of CNY3,099/ton on long liquidation. It settled at CNY3,134/ton, up CNY32.

"Traders lowered their expectation of a crude rebound, in line with crude's shedding gains in electronic trading," said Lin Hui, an analyst with China International Futures.

Total open interest was down 8,184 lots to 65,128 lots, as some traders liquidated their long positions to limit losses, said Ming.

Eight out of 10 contracts settled higher, one was lower and one was untraded.

Overall, trading was more active, with 193,492 lots changing hands, compared with 182,166 lots Monday.

One lot is equal to 10 tons.

"Fuel oil will likely be rangebound between CNY3,000-CNY3,300/ton in the coming week, as crude may remain between $60-$65/bbl, if no big incentive factors occur," said Ming.

Traders are also waiting for U.S. weekly oil inventory data due late Wednesday for further direction in crude futures.

"The U.S. inventory level is still high and will pressure crude prices in the short term," said Ming.
source:ChinaOilweb
China energy oil