The August contract for crude oil expired at 64.72, +1.2%, while the September contract closed at 65.61 after surging to as high as 66.68. The black gold pared early gains after the report from API showed that crude inventory unexpectedly gained in the week ended July 17. For others in the energy complex, gasoline rose +1.3% to 1.81 while heating oil added +0.5% to 1.7. Natural gas edged up +0.4% to close at 3.71.

American Petroleum Institute reported that crude inventory increased +3.1 mmb, compared with consensus of -1.84 mmb decline, to 349.9 mmb last week as refinery dropped -2% to 84%. This was the first increase since April. Cushing stocks also gained +1.67 mmb. Gasoline stockpiles gained +1.33 mmb, higher than market expectation of +0.55 mmb while distillate stockpile added slightly by +0.15 mmb, compared with consensus of over 1 mmb build.

The US Energy Department is going to report its result today. Current market expectation is -2.1 mmb draw in crude oil and +0.65 mmb and +1.5 mmb increases in gasoline and distillate stockpile respectively.

Reuters said that consensus estimate on natural gas price has been reduced to $6/mmBtu from $6.4/mmBtu despite the sharp decline in the number of gas rigs since last September. The downgrade was driven by record high level of gas storage and slow economic recovery.

Gold price retreated -0.2% to settle at 946.9 Tuesday after the Fed Chairman Ben Bernanke's testimony before the Congress. The Chairman outlined some potential exit strategies and reiterated the Fed is able to withdraw from the current accommodative measures in a smooth manner so as to avoid inflation: 'the FOMC believes that a highly accommodative stance of monetary policy will be appropriate for an extended period. However, we also believe that it is important to assure the public and the markets that the extraordinary policy measures we have taken in response to the financial crisis and the recession can be withdrawn in a smooth and timely manner as needed, thereby avoiding the risk that policy stimulus could lead to a future rise in inflation'.

As current and anticipated inflationary concerns have been eased, gold and other precious metals' appeal as inflation hedge diminished. We believe this was the main reason for the slide yesterday. Silver price also plummeted -1.1% to 13.48.

PGMs finished the day with mixed results. While the platinum contract dropped -1%, palladium futures added +0.6%. Platinum fell as Johnson Matthey, the world's third largest autocatalyst maker, report a -21% yoy decline in profit and revenue in the first fiscal quarter, signaling lower demand for platinum. An underground accident happened at Impala's Bushveld Complex which caused 9 fatalities. The tragedy inevitably triggers reviews on the mine safety in South Africa. At the same time, Impala was the world's second largest producer and potential disruption could have material impact in supply.