Crude oil tumbled in Asian and European sessions yesterday but pared its losses in mid- NY session as Wall Street rebounded sharply from the -3% decline in the morning session and closed unchanged. WTI crude oil price ended the day at 68.75, down -2.08%, after plunging to as low as 67.15. After market close, API's inventory report lifted price further. Today in Asia, WTI rose to 70.13 where it met resistance and fell to 69.5 again. Brent crude oil settled at 69.55, down -2.28%, after falling to a 3-month low at 68.15. It was the first time since February 2009 that the contract closed below 70.

Before US market opens, commodities, stocks and other risky assets slumped amid concerns over Spanish bank crisis and escalated tensions on the Korean Peninsula. US bourses also got hit in early session with DJIA and S&P sliding -3%. However, market sentiment improved after release of strong US consumer confidence and both indices closed flat.

The Conference Board reported that consumer confidence jumped to 69 in May, compared with consensus of 59, from 57.9 in the prior month. The improvement was led by the 'expectations' component which surged to 85.3, the highest level since August 2007. Strong consumer confidence index upstaged other economic data such as S&P/Case-Shiller Composite and Italian consumer confidence which were general weaker than expected.

Another factor driving oil price higher was API's report which showed gasoline stockpile dropped -3.19 mmb in the week ended May 21. Crude inventory rose, but by a modest +0.62 mmb. The US Energy Department will release the official data today.

Major currencies also strengthened against the dollar. EURUSD, shrugging off bank solvency concerns, closed +0.1% higher. AUDUSD rebounded +0.5% to settle at 0.8288 after tumbling 10-month low at 0.8066.

Gold, after finding a base at 1166, has been rising steadily. Despite the dramatic stock market performance yesterday, investors' risk appetite remains fragile as uncertainties over European sovereign crisis, Korean tensions and Chinese tightening are not yet resolved. We believe another round of risky asset selloff is not far away. The situation will benefit gold as this will again trigger a flight to safety.

Weekly change in inventory as of 21/05/10
Change
Market Expectation
Previous

Crude oil
 
+0.2mmb
+0.16 mmb

Gasoline
 
-0.20 mmb
-0.29 mmb

Distillate
 
no change
-0.98 mmb

Comparison between API and EIA reports:

API (May 21)

EIA (May 21 )

Actual
Inventory
Previous

Forecast (using API's inventory level)
Inventory

Crude oil
+0.62 mmb
362.9 mmb
-0.794 mmb

+0.31 mmb
363 mmb

Gasoline
-3.19 mmb
220.2 mmb
+0.981 mmb

-1.83 mmb
220 mmb

Distillate
+1.50 mmb
151.9 mmb
-0.331 mmb

-0.81 mmb
152 mmb

API collects stockpile information on a voluntary basis from operators of refineries, 76% of the time, using data in the past 4 years.  

Source: Bloomberg, API, EIA