Crude oil rocketed after the surprisingly good inventory data from the US Energy Department. Expiring today, the September contract rallied +4.7% to close at 72.42. The most-active October contract added +3.9% to 73.83. Others in the energy complex also advanced with RBOB gasoline and heating oil rising +1.7% and +2.9% to 2.03 and 1.92, respectively. Natural gas also climbed +0.7% to 3.12.

Crude inventory drew -8.4 mmb to 343.6 mmb in the week ended August 14 as imports from Gulf Coast plunged to levels which were seen only during hurricanes. Moreover, refinery runs improved modestly by 0.14M bpd to 14.5M bpd as refiners returned from maintenance. However, there's risk for a slowdown again in coming weeks as some refiners will be closed for maintenance.

Booth gasoline and distillate inventories dropped although demand remained sluggish. Gasoline stocks declined -2.2 mmb with demand rising slightly to 9.21M bpd during the week. However, on 4-week average, such level was still below the same period last year. Distillate stocks dropped -0.65 mmb with demand also improving on weekly basis but remained weak when compared with previous years.

Rebounds in US stock markets in afternoon session also helped push energy prices higher. Both Dow Jones Industrial Average and S&P 500 Index added +0.7% to settle at 9279 and 996, respectively. There have rumors that the White House will announce a second stimulus plan to revive the economy. While this might a reason for stock rallies, we doubt if the Government will do so. The Government has not yet finished the existing stimulus of $787B.

The precious metal complex had mixed performance Wednesday. While gold and platinum prices rose, by +0.6% and +0.8%, to 944.8 and 1241.4 respectively. Silver and palladium dropped,-0.6 %and -0.2%, to 13.88 and 271.8.

Silver has traded more inline with industrial metals these days. It's correlation with copper has risen above 90% in recent weeks. Therefore, we believe silver's drop was driven by renewed concerns about economic recovery and correction in China shares.

Silver recovers to 13.94 in Asian session after plummeting to as low as 13.5 yesterday, probably helped by recovery in Asia stock markets. The MSCI Asia Pacific Index gains +0.5% while Japan's Nikkei 225 Stock Averaged adds +0.9%. China's Shanghai Composite Index rebounds more than +2% after the sharp fall yesterday.