After volatile trading yesterday, with the March contract plunged to 40.6 shortly after release of US inventory and then rebounded to 43.6 before pulling back to close at 42.11, crude oil continues to trade with downside bias today.

The stockpile report released yesterday was, once again, bearish. Crude oil ending stock (excluding SPR) rose 6.2mmb to 338.9 mmb, making total inventory 24 mmb, or 8%, more than 5-year average of 314.8 mmb. Stock at Cushing, Oklahoma, added another 0.3 mmb to 33.5 mmb, one step closer to full storage of around 45 mmb.

While we decline in inventories for refinery products, the reason is also more bearish then bullish. For distillates, the stock draw was inline with consensus and was brought by exceptionally cold weather last week. When the weather returns to normal, demand will come down again rapidly.

Although crude oil price continues to trade within our anticipated range of 40-50 this week, we do not rule out further downside as we believe price holds above 40 because of some reasons other than improvement in fundamentals. Weather has been extremely cold last week in the US, OPEC is fully compliant with output cuts - some members even reduced production more than they were assigned, non-OPEC supplies were reduced more than expected.

However, by the end of February, refinery plants will be shut down for seasonal maintenance. We expect refinery utilization rate will deteriorate further from 82.5% last week and demand for crude oil will also fall, thus increase inventory again.

Gold price continues to trade lower after (currently at around 882) making a 3-month high at 916.3 on Jan 26. Dollar's rebound and rallies in stock markets reduced the precious metal's safe haven appeal temporarily.

The dollar rebounded after FOMC kept its policy rate unchanged at 0-0.25% but other central banks continue cutting interest rates aggressively.

RBNZ announced to lower interest rate by 150 bps to 3.5% as recessions deepen both domestically and in overseas. The central bank hinted there's still room for further rate cuts and economists is now increasing their bets on another 100 bps reduction in March. After the announcement, Kiwi dropped to the lowest level in a week and remains under pressure today.

Stock markets rose for the third straight day with the MSCI Asia Pacific Index gaining 1.2% in morning session, driven by financial sectors. The Fed's plans to buy long term T-bonds and RBNZ's rate cut signaled governments efforts to stimulate economy and hence boosted sentiment.