WTI oil price extends yesterday's 2.1% rally (close: 50.97) and attempts to break 51.75(April 25 high). Despite the US Energy Department reported higher-than-expected crude inventory, a large-sized withdrawal in gasoline stockpiles and surge in stock markets likely support the black gold to achieve another monthly rise.

Crude oil inventory rose 4.05 mmb, compared with consensus of less than 2 mmb build, due to strong import and reduction in refinery run. However, also surprised the market was the big 4.7 mmb decline in gasoline stockpile which was driven by lower imports, decline in refinery utilization and relatively stable demand.

On the supply side, reports showed that non-OPEC production has been falling. In China, Sinopec reported a drop in crude throughput of 3.3% y/y in 1Q09, with gasoline and kerosene output higher and diesel lower on annual basis. Earlier this week, Petrochina also reported 5.7% cut in 1Q09 crude output over a year earlier, a 14.6% drop in refinery production and a 2.8% reduction in fuel sales.

Stock markets advanced in US session Wednesday after the -6.1% decline 1Q09 GDP suggested rebuilding of inventory is on the way and the Fed said that the economic outlook had improved modestly since March. Both Dow Jones Industrial Average and S&P 500 Index gained more than 2% and reached the highest levels since end-January/early February.

Government data showed that US' GDP contracted -6.1% in 1Q09 after plunging -6.3% in the previous quarter. Although the reading came in worse than consensus because surprising increase in consumer spending and net exports were more than offset by huge drops in inventories, business investment and government spending, the points that revived investors' hopes were rebounds in consumption and inventory withdrawal.

Consumer spending contributes 70% of the nation's economy and the +2.2% rise in 1Q09, the highest in 2 years, may imply better production and order outlooks. Also, sharp fall in inventory level indicates companies will start rebuilding stocks again. This also points to recovery in productions.

Gold for June delivery rose to as high as 904 Wednesday on the dollar's retreat before erasing some of the gains after the Fed's bullish comment on economic outlook. The gauge edged 0.8% higher and settled at 900.5 for the day. In Asia today, the precious metal fails to recapture the 900 level and trades sideways around 895.

The dollar index plunged to as low as 84.17 before recovering to 84.67. Against the euro, the greenback fell as much as 1.5% to 1.334. In the report yesterday, it also revealed that GDP deflator rose to 2.9% in 1Q09 from 0.4% a quarter ago. This might have triggered inflationary concern which pushed up gold price slightly. However, the FOMC statement released later the day probably disappointed gold bulls as policymakers expect that 'inflation will remain subdued' and there's 'risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term'.