WTI crude oil's volatility was significantly reduced and would probably record a loss of 2% this week, the smallest weekly decline in 5 weeks. Notwithstanding the poor inventory and economic data, oil price's 'steadiness' around 40 level was probably due to the quota compliance by the OPEC.

US' jobless claims data disappointed the market with an increase of 626K people claiming unemployment benefits last week. The reading exceeded market expectation of 590K and revised 591K in the previous month. Later today, January's non-farm payrolls and unemployment rate will be released, should the results worse than consensus, demand outlook on oil and other commodities may go gloomier.

Yet, poor data yesterday only dragged down oil price below $40/bbl modestly. We believe it was OPEC tightening in supply that helped oil price. According to Oil Movement, a tanker tracking agency, OPEC will load 23.41M bpd onto tankers in the 4 weeks to Feb. 21, the same amount shipped in the previous 4 weeks. Moreover, news said that Saudi Arabia, the world's largest oil exporter, has increased the selling prices of its 'Arab Light' oil to customers for March. Arab light's price has been risen to a premium of $1/bbl to the WIT, compared with a discount of $2/bbl this month.

Gold price retreated after surging to 926.3 on profit-taking yesterday and 936.3 seems to be an important hurdle for the precious metal. Analysts from RBC issued an rather 'bearish' comment that gold (spot) may re-test $750 by mid-2009 amid global recession in both advanced and emerging economies and 'expected destocking or sales of scrap gold could be similar to what happened in 1998 during the Asian crisis when gold sales more than offset investment demand for gold'.

However, our views are more on the bullish side, given strong investment demand and lower supply in the future. Fear of economic uncertainty and even default of sovereign debts will continue to push gold higher. The dollar's strength against other major currencies except for yen was due to investors' loss of confidence to other economies and their currencies rather than because they are confident in the dollar. This can also explain the phenomenon that gold continued to surge despite the dollar's strength recently.

On the supply side, S. Africa's gold production has been declining as grades of mines deteriorated. In 2008, gold supply was 2385 tons, 3.6% lower than 2007. The figure is expected to be static in 2009.