Crude oil price spiked to as high as 60.08 before closing 58.85 Tuesday. Over the day, the benchmark contract added 0.5% despite retreat in stock markets. The bullish API inventory report and sharp fall in dollar did help a lot.

The API report showed that crude oil inventory decline 3.13 mmb, compared with consensus of a gain of 1 mmb, to 370.7 mmb for the week ended May 8 as driven by sharp decline in imports (-0.99 mmb) outweighing decline in refinery runs (-0.25 mmb). Cushing stocks also drew 1.9 mmb last week. For refinery products, both gasoline and distillate stockpiles also saw huge withdrawal due to strong increase in demand. The encouraging results make investors turn more optimistic on US' oil inventory report to be released today.

The dollar fell sharply yesterday as trade deficit widened to $27.6B from $25.3B in March. The greenback's weakness will likely extend further today. Against the euro, USD plunges to the lowest in 7 weeks at 1.37 while against the Japanese yen the dollar also drops to 2-week low at 95.8. Added to the dollar's fall was the comment by David Walker, formed US Comptroller General, that US' AAA credit rating should be cut. Commodity currencies (AUD, NZD, CAD) surge as spurred by broad based rally in commodity prices.

The US Energy Department downgraded its oil demand forecast in 2009. The Department now expects world oil consumption will fall by 1.8M bps in 2009, compared with a 1.4M bpd decline as previously projected. OECD oil consumption is expected to fall by nearly 2M bpd in 2009, with oil consumption in Japan alone expected to contract by over 0.5M bpd in 2009. However, rise in demand from non-OECD countries, particularly from China, Middle East and India, will partly offset the bleak outlook in advanced economies. In 2010, world oil consumption is expected to grow by 0.7 M bpd in 2010 on the back of a global economic recovery. Trade report in China did show improvement in oil demand with crude imports rising 14% in April.

Gold price soars on the dollar's weakness and rising expectation on inflation. The benchmark futures for the precious metal extends yesterday's 1.1% rise to as high as 928.5. The inverse correlation between the dollar and gold helps gold rally higher as USD's decline accelerates. Last week, gold price gained 3% while the dollar plummeted 2.2%.

ECB's announcement of buying euro-dominated covered bonds last week indicated the central bank has finally joined the QE regime with the Fed, BOE, SNB and BOJ. Quantitative easing and monetization of government debts made investors worried about inflation.