Market sentiment was buoyed by a set of upbeat manufacturing PMIs across the globe. Meanwhile, political unrest in Egypt appeared to stabilize as various media reported that President Mubarak will announce his intention to step down when his term ends in September. Oil supplies were not disrupted, triggering profit-taking in oil prices with the front-month contract for WTI crude retreating to 90.77, -1.54%, at close. Brent crude, however, climbed higher to 101.74, up +0.72%. Gold price crawled higher as USD weakened. Gains were capped after global PMIs strengthened, suggesting pick-up in the economic recovery.

US ISM rose to 60.8, the highest reading since May 2004, in January from 58.5 in the prior month. Looking at the details, the improvement was broadly based. 'New orders' rose to 67.8 from 62, 'backlogs' jumped +11 points to 58, production climbed +0.5 points to 63.5 while 'employment' gained +2.8 points to 61.7, the highest level since March 1973. The data drove Wall Street higher with DJIA and S&P 500 soaring +1.25% and +1.67% respectively. Elsewhere, PMI in the Eurozone rose to 57.3 in January from 56.9 in the prior month while that in the UK improved to 62 in January from an upwardly revised 58.7 in December. While the results were mixed in China (with the PMI from the government slipping to 52.9 in January from 53.9 in the prior month while and the reading compiled by HSBC improving marginally to 54.5 from 54.4), the details suggested that growth will accelerate further in 1Q11.

In Egypt, President Hosni Mubarak said he will step down after elections for a new leader, pledging his responsibility now is 'to restore the security and stability of the nation to achieve a peaceful transition'. However, protests continued as people wanted end his regime as soon as possible. Despite the chaos, oil supplies through the Suez Canal remained normal. Tensions in Egypt have also posed little threat to other producing nations, except for Algeria.

Abundant stockpile is weighing down WTI crude oil price and widening WTI -Brent spread. According to API, crude inventory gained +3.77 mmb to 346.47 mmb in the week ended January 28. Gasoline stockpile also jumped +3.91 mmb to 236.52 mmb. Distillate stockpile fell -1.10 mmb to 161.32 mmb. While investors await DOE/EIA's official report, consensus forecasts that crude inventory rose for a third consecutive week by +2.5 mmb. Gasoline inventory probably rose again while distillate inventory drew for a second week.

Gold edged higher but gains were capped as ISM data beat expectations and geopolitical tensions in Egypt eased. The fall in oil prices also weighed on the metal. However, demand remained strong in the physical markets. Dealers reported orders received from Thailand and India, while premiums for gold bars stayed at 7-year highs in Singapore and Hong Kong.

Weekly change in inventory as of 28/01/10 ChangeConsensusPrevious
Crude oil  +2.50 mmb+4.84 mmb
Gasoline  +2.00 mmb+2.40 mmb
Distillate  -1.00 mmb-0.14 mmb

Comparison between API and EIA reports:

API (Jan 28) EIA (Jan 28)
ActualInventoryPreviousForecast (using API's inventory level)Inventory
Crude oil+3.77 mmb346.47 mmb+2.12 mmb

+5.90 mmb

346 mmb
Gasoline+3.91 mmb236.52 mmb+1.2 mmb+6.45 mmb237 mmb
Distillate-1.10 mmb161.32 mmb-5.02 mmb-4.34 mmb161 mmb

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