LME copper for delivery in 3 months rebounded for the second day to close at 4431 yesterday after plunging to 3-week low at 4185 on April 28. The metal gained 9.6% over the month. Yesterday's rally was driven by continued withdrawal in LME stockpiles as well as reduced production as industry data showed.

Copper inventory in LME warehouse has continued it downtrend by dropping 5.675K metric ton to 405.775K metric tons yesterday, making the stock level the lowest since mid-January. We believe this may be due to China's buying on dips as price plunged last week. Moreover, despite a pullback from the peak at mid-April, cancelled warrants remain at high level and we believe LME stockpiles will continue to fall as long as cancelled warrants stay strong.

Although it seems that copper price is still being well-supported, we do not think the rebound is sustainable. In China, real demand (excluding SRB buying) is quite weak and increase in scrap supply implies that cathode demand from semis manufacturers could be reduced. Moreover, as we have pointed in our weekly report that arbitrage opportunity has narrowed and copper's appeal to Chinese investors should have been reduced until price has corrected more.

Anglo American reported that copper production declined 5.4% yoy in 1Q09 while Kazakh miner Kazakhmys posted a 20% qoq drop in copper cathode production during the first quarter. Moreover, Chilean copper miner Antofagasta's copper out was also down 5.5% yoy to 111.9K metric tons in 1Q09. However, investors probably ignored the fact that the actual production levels were at or slightly above market expectation.

Crude oil price edged slightly higher (+0.3%) Thursday and closed at 51.12, making April the third consecutive gaining month. Other than improved sentiment as the swine flu may not hurt economy as much as previously expected. Concerning the fundamentals of oil market, supply is still abundant. As reported Wednesday by the US Energy Department, crude oil inventory rose 4.05 mmb to 374.7 mmb last week. We do not feel convinced for oil price to rise above 55 (resistance at 54.66).

Strength in the dollar and failure to break above 900 made the benchmark contract for gold retreat to as low as 880.1 yesterday. Currently trading narrowing around 885 today, the yellow metal may decline further as investment demand has abated recently. Bullion holding in the SPDR Gold Trust has remained unchanged at 1104.45 metric tons for 5 days.