Oil price plummeted severely by 8% Tuesday to close at 41.98 (day-low: 41.41) amid concern on demand destruction as well as likely build-ups in stockpiles in Cushing, Oklahoma. Despite modest recovery to 42, near-term outlook remains weak. The Reuters/Jeffries CRB index also plunged 3.7% as led by decline in crude oil, copper and corn prices.

The macro environment remains weak. US consumer confidence dropped to record low at 37.7 in January, compared with market expectation of 39 and revised 38.6 in the previous month.

The US Energy Department will report its weekly petroleum inventory data. Economists forecast another month of gain in crude oil stockpiles by 3mmb. For gasoline and distillate (including heating oil and diesel), stockpiles are expected to be addition of 1.6mmb and decline of 1.1mmb, respectively.

Earlier, the American Petroleum Institute released a weekly report which showed that crude oil stockpiles increased 0.8mmb last week while that for gasoline added another 0.942mmb. For distillate inventory plunged 0.345mmb.

After peaking at 147.27 in July 2008, WTI crude oil price has fallen by more than 70% and price remains fluctuating at low levels ($30-40/bbl). Seeing the huge volatility since the second half of last year, OPEC would like the CFTC to regulate trading by hedge funds and speculators. In fact, recently, interest from speculators on oil trading has rebounded. According to a report, the number of barrels owned by speculators was only 13% lower than July 2008, the time when oil price reached its peak.

After breaching 900 level briefly, the benchmark futures for gold pulled back slightly. Currently trading above 890, the precious metal changes little in Asian morning as the dollar weakens. Against the euro and pound, the greenback loses 0.58% to 1.3237 and 1% to 1.4266, respectively. The market is waiting for the accompanying statement after the FOMC meeting. Although it's widely anticipated that the Fed will keep interest rate unchanged at 0-0.25%, the central bank will likely give more details on the unconventional easing measures. For instance, the Fed will broaden the range of asset it will buy to relieve the tightened credit markets as well as policies to expand the Fed's balance sheet.

These measures are expected to cause weakening in the dollar and that's the reason for gold's strength recently.