Crude oil recovers to 38.89 after plunging below 35 yesterday as the dollar weakens and stock markets stabilize.

The dollar falls against the Euro and is trading at 1.2672 currently after surging to 3-month high as Germany may roll out the largest economy plan in Europe so as to revive economy in the region. Yesterday, Germany approved draft legislation on the takeover of Hypo Real Estate Holdings and signaled the nation's first bank nationalization since 1930s.

Considering stock markets, both Asian and European shares rose for the first time after falling for several days. In Asia, the MSCI Asia Pacific Index gained 0.6% and Japan's Nikkei 225 Stock Average rose 0.3% as retreats in Japanese yen will help boost earning outlooks for export-dependent corporations in Japan. The reason for the yen to decline was the increase in default risk of sovereign bonds. CDS spread for Japan climbed for the most in 4 years. The situation was just like what we mentioned last week, the British pound and the euro were massively sold down as investors viewed that the nations' insolvency risks increased.

Yesterday, API report a build of crude stockpile by 1.6 mmb for the week ended Feb 13, using the inventory level estimated by API, the US Energy Department may show a draw in crude stockpile today. Although API may not be an accurte predictor of the Energy Department's result, it's worth using as a reference.

Apart from the headline crude oil inventory, also pay attention to buildup of Cushing, Oklahoma where NYMEX WTI is delivered. Storage capacity at Cushing is slightly over 46 mmb and stockpile has reached 34.9 mmb as of Feb 6 (75% full). Rapidly increase in supply but reduced crude processing should continue to pressure front-month WTI contracts.

In China, reports showed that the 2 largest oil traders will export 130 K metric tons of diesel laster in February, same amount as in January but less than that of 200K tons in December. Moreover, the companies will continue halting import of fuel for the 6th consecutive month. These acivities are, however, not expected to have big impacts on fuel prices.

Although gold price for April delivery retreats to 974.3 in European session as investors take profit after the rally to 7-month high at 988.7 yesterday, we believe the precious metal will resume recent uptrend for re-test of 989.6 and then 1033.9 soon. Global interest rates have been approaching zero and default risks on sovereign debts have risen recently even in advanced economies, such environments increased gold's appeal.