Rally in crude oil price loses steam as equities retreat and stockpile in the US is expected to have surged again last week. The benchmark contract plummeted to 56.78 before recovering to 58.5 at close on Monday. Today, the black gold remains sideways around that level.

US stocks declined as recent rises seemed to be overdone. Dow Jones Industrial Average plunged 1.82% to close as 8419 while S& P 500 lost 23.15% to close at 909.24. Both indices surged to the highest in 4 months last week. Despite better-than-expected data in US' non-farm payrolls and initial jobless claims, a survey by Bloomberg showed that economists downgraded the employment condition in the world's largest economy. The consensus indicated that unemployment rates will reach 9.6% and 8.5% in 2010 and 2011 respectively.

The correlation between oil price and US equities is very high at the moment as investors view stock price performance as a gauge on economic outlook. Rise in stock prices indicates optimism of further economic growth and hence oil demand should look more positive.

Crude inventory in the US is expected to have risen 1 mmb to 376.3 mmb for the week ended May 8 while gasoline and distillate stockpiles probably gained 0.25 mmb and 1.03 mmb. The American Petroleum Institute (API) will report its estimates later today.

In China, rise in oil imports was seen in April as the Government increases strategic stockpiles. Oil imports rose 13.6% yoy to 3.9M bpd while domestic stockpile should also increase to 90-100 days.

LME copper for delivery in 3 months rebounds more than 1% to 4626 after China's copper import reached a record high in April. According to the Customs' preliminary data, shipments of copper and copper products soared 6.6% mom to 399 833 metric tons in April, signaling the Government's RMB4 trillion stimulus plan has positive effect on the economy. However, we believe investors should not overreact as the strong data was probably driven by purchase by the Chinese Government. Moreover, demand in countries other than China remains weak.

Gold price retreated to 913.5 yesterday as the dollar recovered and decline in inflation in China. The National Bureau of Statistics reported that CPI and PPI fell 1.5% and 6.6% yoy, respectively, in April. Ease in inflationary pressure diminished gold's appeal as inflation hedge.