Crude oil lost 12% to close as 42.63 after the US Energy Department reported surprising increase in oil inventory, fueling worries on demand side again. Today in Asian session, the February contract changes little but near-term support at 41.08 needs to hold for a rebound.

Oil stockpile for the week ended Dec 29 rose 6.68 mmb, much higher than economists' forecast of +0.9mmb. Inventories for gasoline and distillate also gained more-than-expected by 3.33 mmb and 1.79 mmb respectively. In the report, it also indicated US' fuel consumption during the 4 weeks ended Jan 2 dropped by 2.9% yoy to 20.1M bpd.

Also triggered oil's selloff was the ease in the conflict between Israel and Hamas. News said that Israeli representatives will discuss ceasefire in Cairo today. It's hopeful that the French-Egyptian proposal will put an end to the air and ground strikes in the Gaza Strip. As the conflict enters its 13th days, at least 700 Palestinians were killed and 3000 wounded. Also, 6 Israeli soldiers have died since ground operations started.

In Europe, Russia and Ukraine will soon resume negotiation on natural gas prices. Yesterday, OAO Gazprom, the natural gas monopoly in Russia, halted all supplies transit via Ukraine to Europe.

Gold price fell yesterday but was able to hold above 829.8 support. The precious metal's decline was brought by tumble in oil price and weakness in the Euro. The Eurozone will report unemployment rate and final reading for Q3 GDP which are expected to show how fast economy has deteriorated in the 15-nation region. Unemployment rate in November probably rose 7.8% while final reading in Q3 GDP should have contracted 0.2%, subject to downward risk. The data, together with PPI released yesterday will prompt the ECB to slash interest rate in a greater extent in the meeting on Jan 15.

Later today, the Bank of England will meet for rate discussion and economists widely priced in a 50 bps cut. A higher reduction and/or dovish post-meeting statement will probably send the pound lower - the dollar higher.