Crude oil price rallied after release of the bullish inventory report. The front-month contract rose to as high as 83.03, less than 1 dollar below the 2010-high of 83.95 made in January, before closing at 82.09, up +0.7%. Today in Asia, the black gold slides to 81.55 amid concerns over Chinese tightening.

EIA's oil inventory data beat market expectations. Crude oil inventory increased +1.43 mmb to 343 mmb in the week ended March 5. The less-than- expected build was due to -8% decline in imports being partly offset by -1% drop in utilization rate. Decline in fuel stockpiles is the bright spot. Gasoline stockpile drew -2.96 mmb while the market had anticipated modest gain of +0.15 mmb. The draw was due to lower productions together with +1.2% increase in demand. Distillate inventory dropped for an 8th week, by -2.22 mmb, to 149.6 mmb. The draw was deeper than market forecast of -1 mmb as both imports and production slid. However, demand plummeted -4.8% to 6.645M bpd from a 10-week high of 3.829M bpd last week.

Investors were thrilled by the set of inventory data as it signaled US', the world's biggest oil consumer, energy market began to tighten.

However, profit-taking was seen as price approached 2010-high if 83.95 as weekly inventory data is volatile in nature and more data points are require to confirm sustainable recovery.

There're increased speculations that the Chinese government will accelerate tightening to cool down the overheating economy. Headline CPI surged +2.7% (consensus: +2.5%) y/y in February. The 16-month high inflation index indicates the government's stimulus to boost economy during global recession has resulted in overheat economy. Together with strong expansion in industrial output and new lending, it's higher likely for the government to push further measures to cool down the economy.

The People's Bank of China has raised the required reserve ratio in commercial bank twice since the beginning of the year. Last week, officials said that the central bank has been formulating plans to limit loans from local governments. In order to escalate the cooling process, the central bank may consider hiking interest rates. Since December 2009, The People's Bank of China has not raised its policy rate. The 1-year lending and deposits rate are at 5.31% and 2.25% respectively.

Gold tumbled -1.3% Wednesday, barely holding above 1100 and closing at 1108.1. Others in the precious metal complex also fell with silver losing -1.8%, platinum -0.4% and palladium -1%. We believe decline in precious metals was led by broad-based weakness in the commodity sector amid worries over Chinese tightening.

Today in Asia, the RBNZ announced to keep the OCR at 2.5% and removal of stimulus will probably begin in mid-2010. The central bank revised 2010/11 and 2011/12 GDP growth forecasts to 4.4% and 3.1% from 4.2% and +3.4% and 3.4%, respectively. Surprisingly, the inflation forecasts are upgraded to 2.3% and 2.8% from 1.8% and 2.6% in 2010/11 and 2011/12, correspondingly. That said, the RBNZ remains 'cautious' to domestic economic development as 'house sales and credit growth remaining subdued'.

In Australia, increase in the number of payrolls, by +0.4K, in February was less than market expectation of +15.2K and January's 56.5K. The unemployment rate stayed at 5.3%. Investors were disappointed by the result and take profit on recent rally in AUD.