Crude oil price surged 1.3% to close at 62.45 Tuesday (currently trading at 62.5) as the US released strong consumer confidence index in May. The better-than-expected data also spurred rallies in base metals and stocks. Led by 4.8% increase in nickel price, the base metal complex surged with the exception of zinc price. Stocks in both the US and Europe advanced yesterday. Dow Jones Industrial Average rose 2.4% to close at 8473, S&P 500 gained 2.6% to settles at 910 while benchmark indices in Europe climbed more than 1%.
The Conference Board's sentiment index rose to 54.9, the biggest increase since 2003 and much higher than consensus of 42 and 39.2 in April. While most of the components in the survey improved, the one that contributed most of the gains was 'consumer's future expectations' which gained 20 points. However, the labor market is anticipated to remain weak.
As there's not much industry-specific data for the energy market until tomorrow, oil price has been driven by sentiment and equity markets these few days. Stocks in Asia jump as an extension of overnight rallies in US market. The MSCI Asia Pacific Index soars 1.8%, Japan's Nikkei 225 Stock Average climbs 1.4% and Hong Kong's Hang Seng Index rises 4.7%.
Concerning fundamentals, there's not much news pushing oil price to the current level. While the OPEC will likely keep production quota unchanged despite abundant inventory and weak demand, the US Energy Department will probably report tomorrow that crude inventory has gained 50K barrels for the week ended May 22, driving the total stockpile to 368.6 mmb. According to a survey done by Reuters, the majority of analysts forecast WTI crude oil price would average 52/bbl in 2009, 67/bbl and 79/bbl in 2010 and 2011, respectively.
Gold price slid to as low as 938.2 before recovering to 955.1 Wednesday as USD' rebound continued. Currently trading at 951, the precious metal for June delivery will likely drop for the second day. The dollar index should have found a temporary bottom at 79.91 last Friday and recent recovery may bring the index to 81/82 before the decline resumes. We remain our bullishness in gold as USD's weakness will likely persist. Moreover, economic recovery will also bring in concerns about inflation which will lead investors buy gold as a hedge.
The LME base metal complex rose Tuesday as led by nickel which gained 4.8% to 13400, the highest close since October 2008. Producers' re-stocking cycle has begun and price should recover slowly towards the third quarter, although the path should be choppy. Cancelled warrants have also risen sharply in recent sessions, indicating growth in demand for the metal.