Crude oil price remains strong in European morning. Currently trading at 67.8 (intraday high at 68.99), trading momentum is so strong that a test of 70 level cannot be ruled out. However, the strength is being driven by investors' adventure for risk and yield, rather than genuine improvement in energy market.

The correlation between crude oil and stock index has been hovering at high level since April. Moreover, other data showed that crude oil price has recently demonstrated high correlation with risk appetite. The second and third charts below demonstrated crude oil's movement closely tracks that for EUR/JPY and AUD/JPY. These 2 currency pairs act as good gauges of investors risk seeking attitude. As of July, policy rates in RBA, ECB and BOJ are 3%, 1% and 0.1%, respectively, rallies in EUR/JPY and AUD/JPY are well-explained by the interest rate differential - investors have turned more optimistic on the economy and are willing to investor in more risky assets for potentially higher returns.

However, fundamentals in crude oil market are not as good as shown in crude oil price. In the Asian report, we stressed our worries that a breakdown in refinery crack will made refiners trim their production and we will eventually see huge build in crude inventory again. Time-spread also indicated weakness in the market. While both WTI and Brent Crude oil have been in contango for some time, Dubai crude has joined the regime since last week.

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Gold price continues to trade below 960 in European morning. The precious metal will likely remain in consolidation in coming weeks. While it's not going to rally as strongly as energies and base metals, downside is also limited as physical demand should emerge as price dips.

The benchmark contract for platinum surges +1.4% to 1208, marking the first time for the white metal trade above 1200 since July 2. Merrill Lynch forecasts the noble metal will rise above 1500 in the coming few years as driven by supply disruption in South Africa. According to the report, mine safety issues and reduction in capex in mining companies are the major reasons for decline in production. This, as demand recovers, will help pushing platinum price higher.