Failure to break the resistance as 60.08 and subsequent decline made WTI crude oil price plunge 1.4% to settle at 58.02 Wednesday. In Asian session today, the benchmark contract remains slightly bearish and downside risk towards 56.5/57 cannot be ruled out. Reuters news said that 60 is quite a strong resistance for oil price and a firm break of which will lead the test of 65.5 level.

To our surprise, the 4.63 mmb decline in crude inventory last week was not driven by higher refinery runs which dropped 0.33 mmb to 14.4 mmb. Rather the withdrawal was led by decline in import which dropped 1.2 mmb to 8.7 mmb, similar to the level during hurricane! Stock withdrawal not driven by higher demand made the report look less encouraging as it could not show that the oil market is tightened. The 4.15 mmb decline in gasoline stockpile was also driven by decline in import while demand remained unchanged. For distillate, the inventory gained because rise in demand was offset by increase in import.

Also triggering the selloff was increase in OPEC's exports in April and its downgrade in demand forecasts in 2009. In April, the 11 OPEC members with quotas pimped 25.812M bpd, compared the 25.587M bpd in March. The amount exceeded its quota by 0.967M bpd a day and was the first time since July that the organization increased production. We believe recent price hike had boosted producers to increase supply and this reduced the likelihood that OPEC will announced production cut again later this month. In its monthly report, the cartel also anticipated consumption will contract by 1.57M bpd to 84.03M bpd in 2009, compared with April's projection of 84.18M bpd. 

Gold price for June delivery surged to 931.4 yesterday before retreating to close at 925.9. Currently trading at 924.5, the precious metal continues its choppy trading with cautiously bullish outlook. Having stayed firmly above 900 for a week suggested correction of the precious metal has probably ended. Recent weakness in the dollar and increase in inflation expectation has helped push gold higher. However, as we have always emphasized, capital flows from gold ETF to stock markets has tampered gold's rally. Gold holdings in SPDR Gold Trust rose for the first time since April 9 to 1105.62 metric tons yesterday. However, this was still below last week's peak at 1128 metric tons.

Moreover, although the dollar has weakened significantly as the credit market eased, it remains trading within a broad range. Therefore, we still cannot confirm that the downtrend in the dollar has resumed by now. The dollar index rebounds to above 82 after plunging to 81.87 Wednesday after the US reported disappointing retail sales data. In April, retail sales in the US plunged -0.4% mom, compared with market expectation of -0.1% and a downwardly revised -1.3% in the previous month. Although this was just a reading for 1 month, the sensitive investors became worried about the economic outlook and turned to the dollar again.