The August contract for the black gold trades narrowly around 64 in European morning. While equities continue to go higher amid better sentiment, crude oil falters below 65 level as investors take profit ahead of inventory reports today and tomorrow.

In Asia, the MSCI Asia Pacific Index gained +1.5% while Japan's Nikkei 225 Stock Average jumped +2.7% to close at 9652. Other benchmark indices in the region rose mildly with Hong Kong's Hang Seng Index closing flat and South Korea's Kospi Index edging +0.7% higher. In European morning, UK's FTSE 100 Index rises for the 7th consecutive day as British Airways' shares have been upgraded by Goldman Sachs while Morrison Supermarket revised up its earnings estimates. Germany's DAX and France's CAC Index also advance +1.1% and +0.9%, respectively.

Last week, parent companies of Sinopec (0386.HK) and CNOOC (0883.HK), respectively the second and third largest oil producers in China, announced to have entered into an agreement to buy a 20% stake in Angola's offshore deepwater Block 32 for $1.3B from Marathon Oil Corp, the fourth largest oil company in the US. Shareholding structure after the deal is as follows: Total SA of France, the operator of the field, will continue to hold 30% of the stake while Sonangol holds 20%. Exxon Mobil Corp holds 15% and Marathon will keep 10%.

Whether the deal is earnings accretive is uncertain yet. The block has yielded 12 petroleum discoveries so far but there's upside for further exploration in the future. However, news said that Marathon originally asked for $2B last year and CNOOC and Sinopec apparently got -35% discounts!

National oil companies in China have been doing M& A aggressively in recent year. However, most of the acquisitions happened in Africa and Central Asia. CNOOC's Chairman Fu Chengyu once said that protectionism in the US and Australia made their acquisitions in those countries difficult. For more information about M& A in Chinese oil companies, please click here.

Gold continues hovering around 950 as USD rebounds ahead of Fed Chairman Ben Bernanke's testimony on monetary policy later today. Bernanke said yesterday in the Wall Street Journal that the FOMC has devoted considerable time to issues relating to an exit strategy and is confident that we have the 'necessary tools to withdraw policy accommodation, when that becomes appropriate, in a smooth and timely manner'.

USD recovers to 1.42 against the euro and 1.64 against the pound as the market anticipates the Fed will outline exit strategies from the current massive expansionary measures although the Fed will reiterate that the policy rate will stay low at current level for extended period of time.