Gold rallied to a new high of 1923.7 in European session amid debt worries in the Eurozone. Comments from World Bank President dampened the already-fragile market sentiment and raised demand for safe-haven assets. Oil prices remained under pressure, taking a cue from the stock market. The WTI-Brent spread widened to record level despite closure of 60% of output in the Gulf of Mexico due to Tropical Storm Lee.

World Bank President Robert Zoellick stated that the world economy is moving into a 'dangerous period' and the Eurozone is facing a 'particular sensitive time'. Concerning the outlook of advanced economies, in particular the US and Eurozone, Zoeliick said he believed the US will not have a double-dip recession although growth will be slow. However, the situation in the Eurozone depends on political decisions' and the events evolving in the 17-nation region will affect the US. Zoeliick sounded somehow pessimistic on Eurozone's situation. He noted the current situation indicated that financing and liquidity are insufficient to solve the problem and t'he austerity policies are pushing them [debt-ridden nations] into slower and slower growth and so this could be a downward spiral'.

The WTI-Brent crude spread rose to a record high of 26.6 today amid signs that it will take longer than previously expected for Libyan oil production to resume. The comment by the oil and finance minister for National Transitional Council (NTC) that the civil war has damaged only about 10% of oil facilities appears too optimistic. It's believed that at least 3 years are needed for the country to return to full production of 1.6M bpd. A key problem is that over 60% of Libya's production comes from Sirte basin where many Qaddafi loyalists are still around. Moreover, after being shut for 6 months, the pipelines might have been clogged and reservoir pressure might have dropped, making it harder for the facilities to operate in normal conditions.

Although European oil supplies will be affected by Libya's issue, as well as Shell's force majeure on Bonny light exports and sanctions on Syria, we still think the wide spread it unjustified. Tropical Storm Lee has been downgraded to a depression after making landfall. Oil companies also said the staff will return to work tomorrow. However, over 60% of oil and more than 40% of natural gas outputs in the Gulf of Mexico have remained suspended. Oil supplies in the US might be tighter in the near-term.

The RBA announced to leave the cash rate unchanged at 4.75%. The accompanying statement was less dovish than the market had anticipated as there's no hint on a rate cut. Policymakers said that global financial markets have been 'very unsettled over recent weeks' and the uncertainty and financial volatility is 'reducing confidence' and may result in 'more cautious behavior by firms and households in major countries'. In the near-term, the global growth outlook will look 'somewhat weaker' than what was estimated a few months ago. Although the RBA reiterated that headline inflation should decline as temporary factors disappear, it remained concerned about the medium-term outlook. According to the statement, 'a key question will be the extent to which softer global and domestic growth will work, in due course, to contain inflation'. Barring a rapid deterioration in global economic conditions, the RBA's policy stance is still biased to tightening rather that easing.