Crude oil price rallied to as high as 48.83 before settling at 47.07 (+3.4%) Monday as investors speculate global oil supply is tightening.

Saudi Aramco, the world's largest oil producer, announced over 10% reduction in oil shipment to Japan in April. This will be the 5th consecutive monthly cut in supplies. The market has been 'guessing' whether OPEC will have the fourth round of production cut in March.

Saudi Arabia is the world's biggest oil exporter. Its oil minister normally gives ambiguous opinion on whether the Kingdom will vote for output cuts. From Saudi Aramco's action, some analysts forecast the Kingdom may oppose addition reduction as 'The Saudis seem to have avoided a deeper cut in April supplies to Japan'. However, it's hard to tell which side Saudi will actually go during the meeting. In previous meetings, Saudi Arabia explicitly stated that they might not follow OPEC's cut but it turned out that the Kingdom was one of the most compliant members.

The market forecasts another week of inventory draw in the US. According to Bloomberg survey, crude stockpile probably dropped 0.5 mmb for the week ended Mar 6. For refinery products, gasoline should have fallen 1 mmb while distillate gained 0.2 mmb.

Gold price tumbled yesterday. The precious metal for April delivery plummeted 2.6% to close at 918 as investment demand shrank significantly. Today in Asia, gold extends the decline and is currently trading at 914.The 55-day MA, at 898, should provide some support.

Lack of inflow to the ETF market has made investors uncomfortable. Gold holdings in SPDR stayed at 1028.99 metric tons on Mar 9, after recording for first decline since Jan 8 last Friday.

So why does capital leave gold? Apart from profit taking and liquidation of winning positions to cover losing positions in stock markets, weakening inflation expectation is another important reason.

The difference between rates on 10-year notes and TIPS, which reflects investors' expectation in inflation outlook, narrowed to 82.97 bps Monday. The gauge dropped 4 out of 6 trading days in March.