Crude oil remained sturdy ahead of the US weekly inventories data, which is expected to show a decline last week.

The falling dollar spurred investors to buy commodities as a counter against inflation. In the New York session yesterday dollar went ahead and hit a new low of 1.4600 versus the Euro. Rally in the Asian equities is also boosting the energy futures.

Asian equity markets were mostly higher Thursday, but off early highs. Japanese markets remained bullish Thursday, discounting new government data pointing to weakness in capital spending, as investors instead showed continued hope that an economic recovery is on track. The Cabinet Office said Japanese core machinery orders, considered a leading indicator of capital outlays, fell 9.3% in July from June.

Oil also gained after OPEC agreed to maintain output targets. The dollar, as measured against the currencies of six major trading partners, has dropped 14 percent since March. The American Petroleum Institute reported U.S. stockpiles declined 7.22 million barrels, the biggest drop since Sept. 5, 2008.

Crude oil for October delivery rose as much as 89 cents, or 1.3%, to $72.20 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $72.13 a barrel recently. The contract climbed 21 cents to close at $71.31 a barrel yesterday, the highest settlement since Aug. 28.

MCX September oil may trade in the range of Rs 3520-3445 levels today. Same is right now quoting at Rs 3499 per barrel up Rs 14.

The confusion regarding global economic revival is causing markets to take volatile moves in Base metals. The prices on one day take support of the positive cues on economy and on the other day get busted by the grim attitude. On Wednesday it was the former, and prices saw correction after holding onto most parts of the session in green.

Copper for December delivery on the New York Mercantile Exchange’s COMEX division shed 3.20 cents to settle at $2.9240 a lb. MCX Copper for November expiry closed at Rs 312 per kg down Rs 3.

Goldman Sachs has raised its copper price forecast for end-2010 to $7,650 a tonne, from $5,800 a tonne, the bank said on Tuesday. We remain most constructive on copper – which has substantially outperformed the other metals over the past month – given its higher leverage to robust Chinese growth and limited spare production capacity, the bank said in a research note.

Gold prices which had a supreme run until Wednesday fell from its 18 months highs on account of profit booking. The most active December contract was down $2.70, or 0.3%, at $997.10. Holdings in SPDR Gold Trust the biggest gold exchange-traded fund, stood unchanged at 1,077.63 metric tons.

MCX Gold closed at Rs 15649 per 10 grams down Rs 72.

The Federal Reserve’s Beige Book said that economic activity continued to stabilize in July and August. They also noted that most Districts reported modest improvements in the manufacturing sector.The Mortgage Bankers Association said that its index of mortgage applications jumped up 17% last week to the highest level since May.

Global oil demand peaked at 86.5 million barrels per day in 2007, before the world recession hit. The U.S. Department of Energy said in Short-term Energy Outlook that they expect the price of regular retail gasoline to fall from $2.62 a gallon in August and September to an average of $2.56 in the fourth quarter.

Corn futures edged higher again on Wednesday. The December contract was 2 1/4 cents higher at $3.09 3/4. The March contract was 2 1/4 cents higher at $3.23 1/4.

Corn futures were 2 to 2 3/4 cents lower in the overnight trading session ending Wednesday morning. Futures opened the day session only about a penny lower and prices gradually rebounded through the day to post modest gains. Even so, Wednesday’s action still qualifies as consolidation trade.

Higher crude oil and weakness in the dollar index continued to provide support for corn. There seems to be some desire to cover short positions ahead of Friday’s USDA Crop Production and supply/demand estimates.

The crop condition rating held steady from last week at 69% good to excellent. This compares to 61% a year ago and 56% for the ten year average. The crop rating is down only 3 points from the peak in late June. Seasonally, the average decline is 13 points from late June to early September so the seasonal decline this year is small compared to normal. At 69% good to excellent, the current rating is the second highest for this point in the season since 1994, trailing 2004 by 1 point. At the state level ratings were lower for six states, higher for five states and unchanged for seven states. Ratings increased slightly for Illinois, Kansas, Kentucky, Nebraska, and Wisconsin. The crop rating fell for Colorado, Michigan, Minnesota, North Carolina, North Dakota, and Pennsylvania. Crop development is well behind normal with 50% of the crop dented vs. 32% last week and 75% for the five-year average. Eight percent of the crop is mature compared with 5% a year ago and 23% for the five-year average.

In other news, corn prices are rising in China and the government is selling corn from stocks. This tends to reinforce recent reports that China’s crop has suffered from drought. Some reports indicate that China’s corn crop is down 20 mmt from 166 mmts a year ago. This seems too extreme, but it will be interesting see if USDA makes any downward adjustment on Friday to their current estimate for China at 162.5 mmts.