Driven by strength in stock markets, crude oil price extends last Friday's rally and rises to 53.3 in Asian morning. Even though oil market remains in surplus, investors take long positions in anticipations that the situation will reverse soon.

Stock market in Asia is boosted by an encouraging economic data in the region and rally in Taiwan shares. The MSCI Asia- Pacific Index excluding Japan (holiday in Japan today) climbed 3.7%. Taiwan's TAIEX index extends last week's strength and gains 6% amid speculation on investment from China. In Hong Kong, Hang Seng Index also jumped more than 4%. Last week, the Chinese Government reported that PMI rose to 53.5 in April, indicating the manufacturing sector has expanded for the second month. In Korea, exports and industrial production data also came in better than expected.

Talking about fundamentals directly related to the energy market, we believe oversupply in distillate remains an overhang. In 4Q08 to 1Q09, weak crude oil price drove up refinery margins and incentivized refineries to turn crude oil into products such as distillates. However, the products were not demand-driven and the abundant distillate produced remained idle. We are worried that the huge storage of distillate will not be wiped out until prices have dropped further.

Some regions not bound by OPEC quotas have continued to increase supply recently. In Russia, the world's second-largest producer, production rose about 49K bpd while output from Iraq, an OPEC member not restricted by quota, may rise 4% this month.

Gold price rebounds to 893 from 888.2 Friday at the expense of the dollar's strength. The dollar index plunges to 84.27 while the EURUSD pair surges for a second day to 1.3327. The market takes profit from the dollar's recent gain as they await stress test result which was delayed to May 7. News said that as many as 14 out of the 19 biggest US banks under the test will need to raise capitals.

Commitments of Traders
  • Crude Oil: Speculators reversed from net short to net long positions in crude oil futures for the week ended April 28
  • Gold: Speculative long position in gold futures gained slightly after an unexpected decline in the previous week
  • Silver: Net long increased after dropping for 2 straight weeks
  • Platinum: Net long position has reversed the uptrend since mid-April.