Crude oil extends strength and breaches the key resistance level of 75 as the OPEC upgraded its world energy demand forecast. WTI crude oil price surges to as high as 75.12 in Asian session, the highest level in almost a year, in Asia today after the +1.2% rally Tuesday. The benchmark contract has risen for 5 consecutive days.

The OPEC revised up its forecast on world oil demand by +0.2M bpd to 84.24M bpd this year, representing a contraction of -1.4M bpd from 2008. In 2010, demand was also revised up by +0.37M bpd to 84.93M bpd, representing an increased to +0.7M bpd from 2009. According to the October report, the demand growth next year will be driven by non-OECD countries such as China, the Middle East, India and Latin America.

The organization controlling 40% of the world's oil output has also upgraded the world GDP growth because 'supported by fiscal and monetary policy, the world economy is showing signs of recovery'. While the 2009 forecast remained at the level of -1.2%, the forecast for 2010 was increased by +0.2% to 2.7% with the major adjustment made in the forecast for Chinese GDP growth which is now projected to grow by +8% in 2009 and by +8.5% in 2010.

Gold rises for the third straight days and the fresh record high has been just set at 1071.1. Others in the precious metal complex also gain further. Silver advances +0.9% to 18 after closing flat yesterday which platinum stays at 1363 after climbing +1% yesterday. Passenger car sales in China surpassed 1M unit in September. According to the China Association of Automobile Manufacturers, sales of cars, sport-utility vehicles and multipurpose vehicles jumped +84% to 1.015M units during the month. This is the first time for passenger car sales to be above 1M on monthly basis. Overall vehicle sales also surged +78% to 1.33M units during the month.
USD extended another down leg with the dollar index plunging -0.5% yesterday. Against the euro and pound, the greenback slipped -0.4% and -0.6% which changes against commodity currencies were minimal as recent decline probably have made valuation of these currencies stretched.

Fed Vice Chairman Donald Kohn said that inflation and economic growth will stay below the central bank's objectives for 'quite some time' and that the low-interest-rate policy will be maintained for an 'extended period'. Subdued inflation outlook should be negative for gold. However, recent rally in precious metal prices and strength in TIPS yields suggest that investors' opinions on inflation have diverged from policymakers'. Rather, investors' focus has turned to interest rate differential. As the Fed insists to keep the Fed funds rate low while other central banks begins to tighten, USD will stay as the funding currency and this triggers massive selling pressure.

It's impressive that commodity prices soared even though stock markets retreated as this was against recent positive correlation between commodities, especially crude oil, and equities. In the US, benchmark stock indices pulled back after reaching 1-year high. Dow Jones Industrial Average slid -0.15% to 9871 and S&P 500 dropped -0.28% to 1073.The financial sector got hammered after Goldman Sachs was downgraded to neutral by Meredith Whitney. Goldman's shares dropped -1.5% while JP Morgan and Wells Fargo also slipped -0.9% and -0.7% respectively.

In Asia, the MSCI Asia Pacific Index adds +0.7% but individual index performance is mixed. Japan's Nikkei 255 Stock Average loses -0.24% to 10052 as Japanese yen surges against the dollar. The Bank of Japan announced to keep the policy rate unchanged at 0.1%. At the accompanying statement, the central bank said 'Japan's economy has started to pick u...The decline in business fixed investment, which mainly reflects weak corporate profits, has been moderating'. However, there's no comment on whether the corporate debt purchase program will end as scheduled.