Oil and gold prices remained firm in European session today. Market sentiment is fragile as investors concerned that tensions in the MENA region will escalate further. The rebound in USD amid safe-haven demand probably curbed gains in commodities, though. The front-month contract for WTI crude oil continued hovering around 100 today. Corresponding Brent crude contract initially rose to 116.36 before pulling back to 115.36. Should unrest in the Middle East spread to Saudi Arabia and cause disruption in oil output, oil prices should rally further.

Yemen and Oman are Southern neighbors to Saudi Arabia. In Oman, 2 people were killed and many wounded in demonstrations against the government. Protesters demanded talks with the government on issues including employment, wages and representative political institutions. There have been increasing worries that protests in countries surrounding Saudi Arabia will be spread to the world's largest oil producer. According to the OPEC, the country's oil production was 8.43M bpd, or 31.2% of total production by OPEC -11, in January. Oil export revenues have accounted for 80-90% of national revenues and over 40% of the country's GDP. Saudi Arabia has helped replace oil lost in Libya during the current unrest. According to IEA's update, around 0.85M bpd to 1M bpd of a total of 1.6M bpd of Libyan oil production is suspended.

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Precious metals shone with gold staying at the record level while silver hovering around a 31-month high. Forward curve of silver has moved to backwardation from contango since mid-February, suggesting tighter market in the near-term as driven by coin buying.

Risk appetite remained weak and equities plunged in both Asian and European sessions. Data released were not bad though. US' ISM manufacturing index unexpectedly rose to 61.4 in February, from 60.8 a month ago. In the Eurozone, manufacturing PMI jumped to 59, the highest level since June 2000, in February from 57.3 in the prior month. Germany's business confidence surprisingly rose to a new record high of 111.2 last month from 110.3 in January. Australia's GDP expanded +0.7% q/q in 4Q10, following a downwardly revised +0.1% in the prior quarter. Challenger and ADP will release indicators on February's job market today. Separately, the Fed will publish the Beige Book while Chairman Bernanke will testify before the House Financial Services Committee later today.

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