Oil price extends last week's rally and surges to 46.5, the highest level since Jan 27, in Asian morning as the market widely expects OPEC, an organization of oil exporting countries controlling 40% of the world's oil supplies, will cut production for the 4th time on March 15. The majority of economists forecast a reduction of 0.5-1mmb will be announced.

Among the members in OPEC, Venezuela, Algeria, Iran and Qatar are those opting for another cut. However, Saudi Arabia, the world's largest oil exporter, has yet to express its opinion although the oil minister stated that $75/bbl is a fair price.

Compliance had been a matter concerning OPEC's output reduction. In the past, some of the members in the cartel were notorious of ignoring the quotas assigned to them. Moreover, some analysts even questioned about the unity of the cartel and some members explicitly stated they would not follow OPEC's decisions. However, these things happened more often when oil prices were at highlevel.

Oil price has plunged by more than $100/bbl from the 147.27 peak in July 2008. Although it has already recovered 40% from the trough in January, $40-45/bbl will still be 'too-low' for most of the oil exporting countries. In order to prevent a disastrous decline in national revenue and sky-rocketed budget deficit, most of the OPEC members implemented production cuts and both Bloomberg and Reuters estimated the compliance level was over 80% in recent cuts.

Gold trades narrowly after rising to 945.5 Friday. Record showed that bullion holdings in SPDR Gold Trust dropped to 1028.99 metric on March 6, the first decline since early January. This is a negative sign for the precious metal as investors may be shedding to other safe-haven assets from gold.

CFTC - Commitment of Traders Report (Mar 3):

*Crude oil futures showed net short positions last week.

*Natural Gas' net short positions plunged after surging to 2 months high

*Speculative net long positions in gold futures slid for the second consecutive week while that for silver rose for 7 straight weeks