Crude oil price rebounded to above $40/bbl in European morning as driven by intraday strength in the stock markets. Earlier in Asian session, the gauge was once pressured by poor import data in Japan which showed that the world's second largest economy imports 8% yoy less oil in January. Moreover, Nippon Oil, the biggest refiner in Japan, announced that it will lower crude oil processing by 22% yoy in March because heating oil demand reduced markedly due to economic contraction and warmer weather.

However, the black gold was then led higher by stock markets. In Asia, the MSCI Asia Pacific Index added 1.7% while Japan's Nikkei 225 Stock Average rose 2.7%. Weakness in Japanese yen helped shares and corporate earnings were very much dependent on exports.

Investors are waiting for the US Energy Department's report on petroleum inventories. While the majority of analysts forecast addition of 1.25 mmb of crude last week. API released a rather bullish report yesterday that crude oil stockpiles rose 0.341 mmb to 346.2 mmb. If this level can be used as a reference for today's report, crude oil may have recorded a reduction of 4 mmb in stockpile. For refinery products, both gasoline and distillate are anticipated to show decline in inventory levels.

Gold continues to trade lower Wednesday after the sharp correction yesterday. From 1007.7 made last week, the precious metal has already retreated more than 5%. Although we remain bullish in precious metal in long term, some investors took the Fed Chairman's dovish economic outlook as an implication of deflation and sold down gold. As we have mentioned in previous articles, investors' loss of confidence in sovereign debts was another reason for gold's recent rally. The decline CDS also caused gold's correction. After Bernanke clarified that the Government is not willing to nationalize the nation's largest banks, CDS of Citigroup, Bank of America and other large lenders slid from record highs as investors were relieved from concerns that bondholders or common stock investors might be the biggest loser after the Government's takeover. However, in the UK, nationalization of RBS may seem unavoidable ever after the bank put 200B pounds of toxic and non-toxic assets in the government's insurance program.

In the near-term, funds flowing into gold ETF is crucial. Over the past 2 days, no fund was recorded flowing into the SPDR ETF, the first time since mid-January. If the situation persists for several days, we may see gold price to drop further.