With the exception of WTI crude oil, commodity prices staged broad-based rebounds as driven by strength in stock markets. In fact crude oil price rose to as high as 61.46 in NY morning session but profit-taking was seen after release of better-than-expected inventory report by API. The benchmark contract finished the day at 59.52, -0.3%. Others in the energy complex surged with natural gas jumping +5.1% to 3.43. Gasoline and heating oil also climbed +0.4% and +0.5% to 1.65 and 1.51, respectively.

American Petroleum Institute (API) reported that gasoline stockpile drew -0.069 mmb, compared with market expectation of a gain +1 mmb, to 212.3 mmb in the week July 10. This was good news for traders after seeing stocks bloating for several months. Distillate inventory continued to rise, by +0.625 mmb last week, but the pace was moderated and the increase was less than consensus of +1.9 mmb. Crude stockpile declined -1.2 mmb but worse than market expectation of reduction of -1.6 mmb.

There were several reasons for the selloff after the report. First, investors were disappointed by the small decline in crude inventory. Over the past weeks, we saw draws in crude oil inventory due to high refinery runs. However, demand in oil products remained weak and stockpiles for both gasoline and distillate continued to surge. It was high margins that triggered refinery in spite of dismal demand. Should these incentives disappear, refinery will plunge and demand for crude oil will fall sharply. The consistent slowdown of crude inventory draw appears to support this view.

Second, although gasoline inventory dropped, it's only modest and investors still felt unsettled by the previous huge builds despite peak driving season. Investors remained concern about the demand and global economic outlook. Therefore, they took every rebound in oil price as profit-taking opportunities.

Third, US producer price index rose +1.8% mom in June, higher than market expectation of +0.8% and +0.2% in the prior month. On annual basis, the reading dropped -4.6%, compared with consensus of -5.3% and -5% in May. While this seems contradicting to say that increase in inflation risk hurt crude oil price as crude oil, similar to gold, has been used as inflation hedge. However, this can be the case as we are now in the situation where recovery is slow and economic growth is fragile. The market worries that too much of an increase in oil price, given its extensive use in household and business activities, will hurt economy.

Gold for August delivery was largely unchanged at 922.8 (+0.03%) while the silver contract rose +0.5% to 12.86 as driven by decline in USD and surprising rise in US retail sales and PPI. The Commerce Department said that retail sales rose +0.6% mom in June, compared with +0.4% as anticipated and +0.5% in May. The gauge, together with June's PPI data spurred increase in expectation on inflation and sent prices of precious metals higher.

On the other hand, USD retreated against the pound, and some commodity currencies as investors sought risk in higher-yield investments. Stock markets advanced in both US and Europe. Dow Jones Industrial Average and S&P 500 gained +0.33% and +0.53% respectively to settle at 8359 and 906 respectively while UK's FTSE climbed +0.85% to 4238 and Germany's DAX Index rose +1.26% to 4782.