Crude oil climbed +0.5% to settle at 71.37 Thursday as slowdown in deterioration in manufacturing activities and stabilization in the job market revived sentiment. Moreover, productions disruption in Nigeria helped support price. Natural gas plunged the most in 2 weeks, by-3.8%, to close at 4.09 after a report showed that inventory rose 114 bcf (consensus: +105 bcf) to 2557 bcf in the week ended June 12. Heating oil and gasoline slid -1.4% and -0.2% respectively.

US Labor Department said the number of people claiming unemployment insurance dropped by 148K to 6.69M in the week ended June 6 while the initial jobless claims increased to 608K, compared with market forecast of 610K and 601K in the prior week. Although employment condition remained weak, recent data showed that it's stabilizing. Leading indicators rose +1.2% in May, following an upwardly revised +1.1% a month ago, suggesting the market has improved confidence in the economy in the coming 3-6 months. Philly Fed economic index also improved to -2.2, the highest level in 9 months, in June from -22.6 in May.
US stocks halted 3 day's loss as risk appetite returned. Dow Jones Industrial Average added +0.69% to 8556 while S&P rise +0.84% to 918.4. Better sentiment has carried on with the MSCI Asia Pacific Index adding +0.4% today.

More information about oil imports to China was released. Implied oil demand was increased +6.7% yoy in May. Gasoline demand continued to be well-supported by government incentives to boost the auto sector. Diesel demand, on the other hand, remained sluggish though modest improvement was seen.

Gold for August delivery ended the day by sliding -0.1% to 934.6 despite early bounce to as high as 944. The dollar index's rebound by almost 1% pressured the precious metal. Silver's contract also dropped -0.3% to 14.24. USD's strength may continue to in coming few weeks and precious metals may remain under pressure.

Although silver has outperformed gold since the beginning of the year (Gold: +6% ytd; silver:+23.7% ytd), we believe silver price will get bigger hit should there be corrections. Fundamentals remain weak in silver while recent rapid surge in speculative long position in futures also increases volatility.

Surplus supply in silver should continue in coming years. In fact, only about 13% of silver mine supply primary. The rest comes from by-products for copper mining, and zinc and lead mining. Therefore silver mine supply is highly dependent on global economy and supply for copper and zinc-lead mine supply. Industry survey showed that while primary silver supply will decline, rise in copper mine production in coming 2 years will drive silver mine supply higher by almost 10% towards 2011.

Despite rise in investment demand, over 80% of silver was in fabrication of which around 50% was for industrial application. Consumption in that front is expected to remain bleak.

Platinum edged +0.2% to close at 1207.6 amid labor strike in South Africa. The National Union of Mineworkers (NUM) said declared a dispute over wages against Impala Platinum. The Union has demanded a 20% rise in wages. The 2 parties will meet on June 24 to resolve the issue, after which the case will be taken to the Commission for Conciliation, Mediation and Arbitration. Impala Platinum is the second largest platinum producer in the world. In 2008, the company had platinum output of 1.9M oz, around 32% of global supply.