Although crude oil price recovered losses in European session after the inventory report by the US Energy Department, price was still slightly down -0.3% to close at 65.4. Gasoline and heating oil prices surged, by +0.8% and +1.4% to 1.711 and 1.838, respectively as stock builds were less than anticipated. Natural gas price also gained +2.4% to close at 3.793, the highest in 3 weeks.

Crude inventory dropped -1.8 mmb last week as driving by draws in Midwest, Rocky Mountain and West Coast which were partly offset by builds in the East Coast and Gulf Coast. The pleasant surprise was unchanged stockpiles at Cushing, in contrast with market expectation of an impressive build. Product inventory continued to build but the pace has been slowed down.

Gasoline stockpiles gained +0.81 mmb as driven by sharp fall in refinery runs and lower import from Europe. However, demand remained weak with 4-week average dropped -1.8%. Distillate inventory rose +1.2 mmb to 160.5 mmb. Mild improvement was seen in demand but the 4-week average remained -11% below the level in the same period last year.

Natural gas price rallied to the highest in 3 weeks as the market anticipated gas storage rose +66 bcf, the smallest gain since April 17, to 2952 bcf.

Stock markets fell in NY session as led by oil companies. Dow Jones Industrial Average slid -0.4% to 8881 while S&P 500 Index lost -0.1% to 954. Today in Asia, stocks rally for the 8th consecutive days with the MSCI Asia Pacific Index gaining +0.6%. Weaker Japanese yen also pushes the Nikkei 225 Stock Average higher by +1.2% as the heavily export-dependent Japanese economy should benefit from weaker currency.

The market will likely in consolidative mode until US session unless we see surprising outcome from retail sales in the UK. The gauge is expected to have gained +0.3% mom in June following a -0.6% decline in the previous month. On annual basis, retail sales probably increased +2.1% after a -1.6% fall in May.

In the US, existing home sales should have increased to 4.8M units in June from 4.77M units a month ago. Initial jobless claims probably rose to 555K in the week ended July 18 following an unexpected decline to 522K in the previous month due to earlier-than-usual closure in auto plants. As the weekly initial claims data are usually volatile, one should also take a look at continuing claims and 4-week average.

Gold price climbed +0.7% to settle at 953.3 Wednesday. China's Premier Wen Jiabao said that the Chinese government has plans to deploy a portion of its $2.13 trillion in foreign exchange reserves to support Chinese companies' expansions overseas. The plan is believed to part the nation's strategy to reduce reliance on the USD as a reserve currency.

Earlier this week, the IMF voted to pump $250B into global foreign exchange reserves in order to boost liquidity. Out of the $250B, 40% will go to emerging markets and the allocation will account ort 20% pg low income countries' reserves. Apart from providing liquidity worldwide, many view this as the first step in the direction of making SDRs a global reserve currency in the long term. Both actions from China and the IMF are negative for USD, and positive for gold, in nature.