Having struggled to close above the 70 level after release of inventory data and US industrial output, WTI crude oil eventually settled at 70.47, -0.2%, Tuesday. Natural gas also dropped -1.3% to 4.13 after a +8.4% technical rebound in the prior day. Gasoline and heating oil edged up slightly by +0.9% and +0.5%, respectively.

American Petroleum Institute (API), an industry-sponsored agency, reported that crude inventory dropped -1.26 mmb, compared with consensus of -2.04 mmb, to 356.6 mmb in the week ended June 12. The withdrawal was less than the previous week as imports rose +0.83 mmb to 9.35 mmb while refinery runs also dropped modestly. Stocks at Cushing, where WTI crude is stored, added +0.29 mmb during the week.

The major disappointment came from gasoline stockpile which increased 2.14 mmb to 207.7 mmb. The rise was significantly higher than market expectation of a +0.38 mmb gain and it's rather a bad sign to see such high increase in stockpile during peak driving season in the US. Distillate stockpile rose +0.88 mmb, less than consensus of +1 mmb.

To be released today, US CPI is expected to have risen +0.3% mom in May as driven by a +10.6% rally in retail gasoline price. High gasoline price will reduce consumer spending and in turns delay economic recovery.
The US Energy Department will deliver its inventory data later today. Crude inventory probably dropped -2 mmb last week while gasoline and distillate stockpiles are forecast to have risen +0.55 mmb and +1.2 mmb, respectively.

US' industrial production contracted -1.1% in May, worse than consensus of -0.8% and -0.7% a month ago. At the same time, capacity utilization also reduced to record low of 68.3% from 69% in April, suggesting the manufacturing sector remained weak as demands for consumer goods and business equipment were sluggish.

The dollar index slid -1% and USD also declined against major currencies (except for CAD, AUD and NZD) Tuesday as investors anticipated the governments of Brazil, Russia, India and China (BRIC) will consider buying each others' bonds to reduce dependence on USD. Moreover, news said that the Fed may use the policy statement of next week's FOMC meeting to suppress speculations on rate hike. In early June, speculations that the Fed may raise policy rate increased shortly after May's non-farm payrolls declined less than anticipated. Yields on both of CBOT's Fed fund futures and short-term Treasury notes surged, indicating the market had priced in 70% chance the Fed will increase rates in November. The bets have been reduced to 50% recently.

Gold for August delivery added a modest +0.5% to settle at 932.2 while July contract for silver rose +0.7% to 14.13 as driven by USD's weakness. Precious metals will likely trade with a consolidative mode this week and the movement will continue to be directed the dollar. Platinum futures for July also rose +0.6% to 1220.9.