The inventory report showed signs that fundamentals in the energy market has improved. Over the past few months, we have been saying that oil price's rally was 'sentiment-driven' or 'dollar-driven' and not supported by fundamentals. The huge reduction in crude stockpiles as reported by both API and the US Energy Department indeed gave us the evidence we have been longing for. However, mind that weekly inventory data are volatile in nature and we will monitor the upcoming data series before confirming a turnaround in energy market.

WTI crude oil price rises for the third consecutive day. Currently trading at 72.04, the benchmark contract has reached the highest level since October last year and near-term upside momentum remains strong. Our technical team forecasts price will extend further to 76.77 as long as support level at 66.79 holds.

Crude oil soared (+1.9%) Wednesday despite USD's strength in NY session and decline in US stocks indicated that the market has returned to the fundamentals. Other commodities in the energy complex also rose with natural gas (-0.6%) as an exception. Gasoline gained +2.5% while heating oil added +1.4%.

Kuwait oil minister Sheikh Ahmed al-Abdullah al-Sabah said that OPEC will only raise production if prices rose toward 100/bbl, suggesting that the price target (75/bbl) indicated by Saudi Arabia was not an agreed target level among OPEC members. Another point worth noting is that Sheikh Ahmed believed that recent rally in oil price has been driven by USD's weakness as investors used oil as a hedge, but not because demand has improved.

The precious metal complex had little change yesterday with gold staying flat at 954.7 and silver adding +0.6% to 15.23. Platinum rose +1.2% to 1273.2 while palladium climbed +0.7% to 258.75. A report from GFMS said that the 10% rally in gold spot price over the previous 2 months dented that rate of minders' de-hedging activities.

Gold's movement will likely continue to be tracking USD's rise and falls. Broadly speaking, we continue to view that the dollar will weaken further against major currencies due to the fiscal deficit issue the US' is facing. Moreover, interest rate differentials between USD and other higher-yield currencies will also weight on USD should risk appetite continue to rise as economy recovers.

RBNZ decided to keep interest rate unchanged at 2.5% after the meeting in June. Although the central bank reiterated to 'keep the OCR at or below the current level through until the latter part of 2010', the policy rate in New Zealand is still significantly higher than 0-0.25% in the US.