The market was somewhat stronger in NY session Wednesday as a more upbeat FOMC statement and German Chancellor's comment that assistance to Greece needs to be sped up overshadowed S&P's downgrade of credit rating in Spain. Recently, commodity prices have been directed by macroeconomic news and development of sovereign problems in the Eurozone. While industry-specific data still affect price movement, the impacts are not as strong as in previous months and are somewhat distorted.

WTI crude oil price gained for the first time in 3 days. Closing at 83.22, the front-month contract reversed early losses and added +0.95% for the day. According to the US Energy Department, crude oil inventory rose +1.96 mmb (consensus: +1.4 mmb) to 357.8 mmb in the week ended April 23. Cushing stock continued to climb for the 6th week but the rise, at +0.45 mmb, was a significant moderation from previous weeks.

Gasoline inventory level drew -1.24 mmb, compared with market expectations of a gain of +0.5 mmb as the -2.03% drop in production was only partly offset by +30.3% increase in imports. Demand rose +1.51% to 9.29M bpd. Distillate stockpile, however, rose +2.94 mmb to 151.8 mmb despite +3.69% increase in demand. Both imports and production soared, by +138% and +2.61% respectively.

With both crude and distillate stockpiles rising more than expected, we do not find the set of data as 'positive'. Instead, it unveiled the ample supply in the US market. While 'decline in gasoline inventory' and '+3.5% increase in refinery runs' may be seen as reasons buying, we view oil's rebound yesterday as driven by better market sentiment and strength in stock markets.

Oil price was further boosted by the Fed's announcement to keep the policy rate unchanged at 0-+0.25%. Also, it will maintain interest rates at 'exceptionally low level' for an 'extended period'. The Fed has turned more upbeat in assessing the economic outlook and acknowledged starts have edged up' but remain at 'a depressed level' while the labor market 'is beginning to improve', compared with previous description of 'is stabilizing'.

The debt crisis is engulfing countries in the Eurozone. After downgrading Greece and Portugal, the S&P cut Spain's credit rating by 1 notch to AA with a negative outlook. While the action initially sent the euro to a 1-year low, the currency pared losses as Germany's Chancellor Angela Merkel pledged to speed up the process of loan provisions to Greece.

Gold price rose for a second day on safe haven demand as contagion of Greece's deficit problem intensified. The benchmark contract added +0.83% to close at 1171.8 (intra-day high: 11175.3). Strength in the yellow metal despite soothing comments from European government officials including the president of the European Council Herman Van Rompny, ECB President Trichet and European Central Bank executive board member Juergen Stark suggests many market players are unconvinced with the idea that Greece will not default. Even if Greece manages to avoid a default this time, the risk has been spreading so quickly to nearby countries that a banking crisis is possibly developing in the Eurozone, the second largest currency bloc. Worries about long-term sovereign problems in the region are driving investors to gold.