Crude oil eased after rallying 10% to above $38/bbl last Friday. Currently consolidating within 37/38, near-term price outlook becomes uncertain as on one hand, world economic outlook remains gloomy while on the other hand, oil producers become more serious and aggressive in controlling supplies so as to give a new balance to demand/supply.

Released a few hours ago, Japan's GDP contracted by an annualized 12.7% in 4Q08, the biggest decline since 1974 oil shock, indicating the world's second largest economy has deepened in recession. Last week, report showed that 4Q08 GDP in Eurozone also plunged more than expected. As demand on oil depends heavily on economic growth, these negative data suggested worsening prospect for oil consumption.

OPEC, an organization controlling more than 40% of the world's oil exports, said that they have achieved 80% compliance in January. Though not 100%, the level of compliance has already improved, showing the determination of the group to defend oil prices after witnessing the over $100/bbl tumble since July 2008. OPEC will likely reduce production again in March if oil price continues to trade below $40/bbl.

Investment demand on crude oil futures decreased last month. According to CFTC, open interests reduced 1.3% while the number of net long position was down by 12698 contracts for the week ended Feb 10 compared with the previous week.

Gold price continues to trade sideways above 930 in Asian morning as traders take profits after the precious metal rallied to as high as 954 last week. We remain our bullish view and suggest to buy gold as it pulls back. Gold and other precious metals benefit during times of crisis and investors will continues to treat these expensive hard assets as safe havens in the current financial crisis.

According to CFTC, net speculative long positions rose 8316 to 163622 contracts. Other the futures, investments in gold coins and ETF have surged in recent weeks.

Investment in gold ETF since the beginning of 2009 to Feb 11 has reached a record of over 200 metric tons, compared with 62 metric tons over the same period last year. Surge in ETF demand is expected to accelerate later in the year as there are significant signs that the inflationary pressure brought by stimulus plans has been higher than what the central banks had expected. Rise in investment demand is anticipated to more than offset decline in fabrication demand on jewelry and industrial components.