WTI Crude oil rose to as high as 89.97 before settling at 89.82 yesterday amid expectations that better global economic prospect would spur oil demand. API's report after market close showed another week of draw in crude stockpiles kept prices supported. The front-month contract broke briefly above 90, the first time since December 7, in Asian session today. Strong growth in Japan's exports signaled the country's recovery continued despite appreciation in Japanese yen. Gold edged higher in thin trade in the face of decline in the euro. Moody's warning of downgrading Portugal's credit rating reminded the market of debt concerns in the periphery. While we are waiting for upward revisions in US GDP, upbeat retail sales data helped maintain the bullish sentiment. According to a survey by ICSC and Goldman Sachs, same-store sales at a number of US retailers rose +4.2% y/y last week as around 74% of consumer completed shopping by 'Super Saturday' (December 18), compared with +56.6% a week earlier. Increase in household consumption is an indication that consumer confidence has returned and is crucial for economic growth. The commerce Department today may show 3Q10 GDP grew +2.8%, compared with +2.5% estimated in the prior month. Oil markets have tightened as shown in decline in oil inventories. According to American Petroleum Institute, crude oil inventories fell for a 4th consecutive week, by -5.8 mmb in the week ended December 17, to 342.01 mmb. Meanwhile, stockpiles for gasoline dipped -2.9 mmb to 219.52 mmb while that for distillate added +0.02 mmb to 161.26 mmb during the week. In the report by the US Energy Department, crude oil probably dropped -2.3 mmb, distillate slipped -0.7 mmb and gasoline gained +1.5 mmb. China's pledge to help the EU only eased worries temporarily as Moody's said it may downgrade Portugal's bond rating by 1 or 2 notches as 'the likely deterioration in debt affordability over the medium term and ongoing concerns about the economy's ability to withstand fiscal consolidation and private-sector deleveraging mean its outlook may no longer be consistent with an A1 rating'. Both Greek and Portuguese spreads to German bunds continued to widen overnight. Risk aversion was also seen as Swiss franc surged to a record high against the euro for a 5th day yesterday. It's possible that Portugal will be the 3rd country to seek bailout from EU/IMF, following Greece and Ireland. Apart from US GDP, existing home sales and house price index will also be released in NY session today. Existing home sales probably rose +7.22% m/m to 4.75M in Noember while house price index might have dipped -0.1% m/m in October after a -0.7% drop in the prior month. Earlier in the day, the BOE minutes will unveil policymakers' split views on the monetary policy. While the majority voted for keeping the Bank rate unchanged at 0.5% and the asset-buying program at 200B program, 2 members voted against it. While Adam Posen preferred to maintain the policy rate at 0.5% and increase the size of the asset purchase program by +50B pound to a total of 250B pound, Andrew Sentance preferred an increase in Bank Rate of +25bps and to maintain the size of the asset purchase program at 200B pound.

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