The market remains under pressure as Germany's ban on short-selling activities triggered a new round of panic selling in risky assets. WTI crude oil price extends the 7th-day decline to as low as 67.9, the lowest level since September 30, 2009. The contract has plummeted more than -20% so far in May. Despite a plunge below the OPEC's preferred range of 70-80, Saudi Arabia's financial minister stress that he's not worried about the decline and the country will commit to the planned projects.

Selloff in oil price has been spurred by slumps in stock markets, given the strong correlation the 2 have been trading recently. In Asia, the MSCI Asia Pacific Index dipped -1.5% to a 3-month low. Individual stock indices also weakened with Japan's Nikkei 225 Stock Average sliding -0.54% while Singapore's Straits Times and Hong Kong's Hang Seng Index losing -2.40% and -1.83% respectively. In Europe, all major indices tumble more than -2%. It's ironic that while the Bafin tries to reduce the extraordinary volatility in financial markets by imposing trading restrictions, it actually increases volatility in the market.

While we expect today's US oil inventory will have limited impact of price movement, recent stock builds, especially from Cushing, Oklahoma, have not only widened spread between WTI and Brent crude oil price, but also exacerbated the contango condition in the Nymex contract. The chart below shows that the time spread between WTI June and July contract widened to 4.59/bbl last Thursday after a report on the previous day showed that Cushing stocks soared to a new record high of 37 mmb.

Gold slips but buying interest is seen above 1200. Liquidation of long positions will continue for some time and further weakness in the yellow metal cannot be ruled out. At the same time, gold's decline may also be driven by cashing-out activities as traders need to pay margin calls in investments elsewhere!

Falls in platinum and palladium were more serious. After a brief rebound yesterday, platinum heads lower towards 1600 in European session. Worries over economic slowdown weigh on metals will strong industrial uses. Palladium slides to 464.5, the lowest level since late-March 2009, despite OAO GMK Norilsk Nickel's, a producer of nickel and palladium, comment that Russia is almost out of palladium stockpile. According to Viktor Sprogis, the Deputy CEO of the company, the government stockpiles of palladium are gone, as judge by indirect indicators. Therefore, 'we, as well as other major platinum-group metal producers, think this factor will no longer affect the market'.

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