Crude oil price sank to as low as 70.67 after the US Energy Department reported that crude inventory rose +0.13 mmb in the week ended August 21. Although encouraging durable goods orders and housing data in the US lifted stock markets, they failed to support oil price. The benchmark contract ended the day -0.9% lower to 71.43. RBOB gasoline and heating oil slid -1.2% and -0.25 to 1.98 and 1.85 respectively.

Against market expectation of a -1.15 mmb decline, crude inventory increased +0.13 mmb to 343.8 mmb last week as driven by higher imports but lower refinery runs. The greater-than-expected increase came from the Midwest (PADD 2).

Gasoline stockpiles dropped -1.7 mmb, more than market expectation of -0.8 mmb. However, demand fell to 9.105M bpd, -1% from last week and -3.25% from the same period last year. 4-week average also dropped to 9.115M bpd, from 9.132M bpd a week ago and 9.441M bpd a year ago.

Distillate inventory rose +0.77 mmb as increase in production offset reduction in imports. Demand plunged to 3.412M bpd from 3.466M bpd on weekly basis. For 4-week average, although we saw demand rose for the second week to 3.376M bpd, it remained almost -20% below the same period in 2008.

Dollar and Yen gained interest as investors speculated economic growth in China would slow down as the Government adopted stricter measures to curb lending. USD rose against +0.4% the euro and closed at 1.424. Commodity currencies also dropped with Aussie plunging -0.5% to 0.8268.

China's State Council publish a statement warning of overcapacity in emerging sectors and said that the government would move to 'guide' development troubled by overcapacity and redundant projects. Guidance, which includes strict controls on market access, reinforced environmental supervision, and tougher controls over land use, would be particularly enhanced on the development of steel, cement, plate glass, coal chemical, poly silicon, and wind power sectors. The statement also said that 'banks were ordered to lend money for these sectors in strict accordance with present industrial policies'.

Strength in USD put precious metals under pressure. The benchmark contract for gold slid -0.02% to 945.8 while that for silver dropped -0.4% to 14.26.

PGMs plummeted with platinum and palladium losing -0.8% and -1% respectively. Although labor strike at Impala likely takes longer than previously expected, production concerns failed to lift platinum price. However, Toyota's announcement of cutting production might have pressured price. The biggest automaker in Japan said it would cut domestic production by 220K units by closing a line at its Takaoka plant from early next year through to 2H11. Output cut in Europe might also be seen later.