Oil price dropped further to 36/37 in European morning despite OPEC's reduction in oil output will reduce supply by 9%. Investors worry that deterioration in global demand will be much faster than previously anticipated.

According to Bloomberg, the majority of economists forecast that economic in the US will contract by 1.5%, 0.5% more than projected a month ago. GDP is expected to have contracted 5% in 4Q08, another 3% in 1Q09 and 0.8% in 2Q09.

Natural gas price also slid following crude oil's fall. In our 2009 commodity outlook published in early-January, we mentioned that natural gas price will remain under pressure until late 2009 because of oversupply. In our recent research, we would like to reinforce this view and state that price should recover from 2010.

Demand of natural gas is mainly a function of economic condition, heating degree days (HDD) and natural gas prices. According to Bloomberg, economists forecast US GDP will contract 1.5% in 2009, down from -1% projection a month ago while observatory forecast that the number of HDD in 2009 is similar to that in 2008. Demand for gas will probably contract by at least 1% yoy in 2009 with consumption from industrial sector plunging the most.

Production remains robust at present. However, given reduction in rig count and decline in E&P and drilling investments, we are able to get a more balanced demand/supply condition by second half of 09 to end-09.

Although LNG imports may pose downside risk on natural gas prices, we do not view this as significant for the moment. Although LNG import to the US may increase because Asia no long accepts spot cargoes while storage in Europe is full, European and Asian regions offer higher prices as in the US, natural gas is selling at 50% discount of LNG.

Gold price's decline below 829.8 (currently trading at 815) turns our near-term outlook on gold bearish. Plunge in euro to 1.33 against the dollar due to increased speculation on ECB's rate cut weighed on gold. However, we expect the Euro to be supported at 1.3 and yield consolidation.