Oil price tumbled to as low as 33.94 yesterday before recovering to close at 2-month low at 34.36, -4.4% throughout the day, as investors were unsettled with the worsening economic outlook worldwide. The black gold's decline intensified after the US government reported a worse-than expected inventory report Wednesday, together with the lack-of-details financial stability plan announced by the Treasury.

Crude oil's slump came inline with the stock market. Dow Jones Industrial Average slid 239.5 points to as low as 7700 before rebounding to 7933 in the last hour of trading. The decline S&P dragged the index down to 3-month low at 809 before renewed buying pushed it back over 830 level and eventually closed at 835, up 1.45 points from Wednesday.

As expected, IEA reduced its forecast on oil demand again. It now anticipates global oil demand will decline by 1M bpd in 2009, down from 0.5M bpd projected a month earlier, on weaker economic outlook.

Deteriorating demand and increasing inventory at Cushing, Oklahoma, should continue to weigh on WTI crude oil price with the front month contracts come under greater pressure. We expect the forward price curve of WTI will be shifted lower. Bigger spread between near-term and longer -term contracts will also make the curve steeper- which means contango structure will become more serious.

Gold price continues to move independently from oil price's weakness and the dollar's strength as the precious metal for April delivery rallied to as high as 954 Thursday after breaching the important resistance at 936.3 yesterday. Currently trading at 942.6, gold's recent rise will resume for 1003.9 resistance.

The dollar's strength despite the enormous $789B stimulus plan as economy in other regions got even worse. Yesterday, the dollar rose to the highest level in almost a week at 1.2722 against the euro after the Eurozone reported weak industrial output. However, EURUSD at 1.27 is probably a temporary low as renewed buying usually emerges as the currency pair falls to such level.

We do not rule further advance of the dollar against the Euro on interest rate differential as the ECB's rate cut has been behind the curve. Given recent poor economic data, we believe the central bank will be under pressure to lower interest rate further.