Commodities Daily - April 13, 2020

> Oil stabilizing after tough, but ultimately successful OPEC+ talks. After another three days of OPEC+ and G20 talks, today we have arrived at the same conclusion that we reached on Friday - the deal will not be able to boost prices in April or May, given the scale of inventory builds we are observing, but it may provide a floor for Brent futures of around $20/bbl in the medium term. Today, the EIA's drilling productivity report will be in focus later in the day, in particular its forecast for US tight oil production growth in May. This week, we expect Brent to move toward technical support at $29.8/bbl on disappointment over the OPEC+ deal. A break below could be followed by a drop to $27.1/bbl on potentially downbeat US inventory data and monthly OPEC and IEA reports.> Gold at technical crossroads as it approaches $1,700/oz. The technical picture shows that gold is more likely now to retrace back to support at $1,657/oz, especially given that it has so far failed to break resistance at $1,702/oz (although this level did not prove to be a particularly tough resistance point a month ago). However, it also important to emphasize that a break above $1,702/oz could lead to a gain to $1,740/oz. Today, many markets, including London, are closed for Easter Monday. French President Emmanuel Macron will deliver an address to the nation about the Covid-19 outbreak and the government's lockdown policy.OIL STABILIZING AFTER TOUGH, BUT ULTIMATELY SUCCESSFUL OPEC+ TALKSAfter sliding from $36/bbl toward $31/bbl during the second half of Thursday on concerns over the OPEC+ deal and fears that the cuts would be insufficient to offset the drop in demand, front-month Brent has opened this week close to the latter mark (Friday was a holiday, with trading in NYMEX WTI and ICE Brent futures closed). Today, investors are analyzing the results of the four-day-long OPEC+ and G20 negotiations, which had many twists and turns. This resulted in choppy trading in Asia, with Brent oscillating in a $31-34/bbl range. One highlight was Mexico's refusal to commit to the 23% cut from its October 2018 baseline that was agreed on in principal by OPEC+ on Thursday. After days of wrangling, the country only agreed to cut by 0.1 mln bpd rather than the originally proposed 0.4 mln bpd. As a result, the official OPEC+ production cut in May-June will not be 10 mln bpd, but 9.7 mln bpd. In addition, the G20 meeting, which was supposed to bring 5 mln bpd of additional cuts, failed to deliver any hard commitments from the US, Canada, Brazil, Norway and others. We would also like to stress that the supply cut agreed upon does not come close to matching the coronavirus-driven decline in global demand, which could be down 20-30 mln bpd y-o-y in April and possibly in May as well (if the global lockdowns are not lifted). Inventories will likely continue to build at an alarming pace for as long as the global lockdowns remain in place. Furthermore, it is still very likely that global inventories will peak by mid-May, right as OPEC+ will start cutting production. In reality, the OPEC+ cuts in May and June will be closer to 7 mln bpd (versus 1Q20, when the previous OPEC+ deal was in place) than to the inflated 9.7 mln bpd headline figure (based on October 2018 baselines). The headline figure was also nowhere near the 20 mln bpd number that leaked early on Thursday and pushed Brent to $36/bbl. Nonetheless, some OPEC+ and G20 producers are still trying to sell the deal as a 20 mln bpd production cut, which Energy Aspects has noted requires a lot of double-counting, creative accounting and obfuscation. Meanwhile, Russia can keep producing above 9 mln bpd and still claim full compliance with its 8.5 mln bpd crude oil production target, since it produces 0.7-0.8 mln bpd of condensate and its 11 mln bpd baseline includes crude oil as well as condensate production.After another three days of OPEC+ and G20 talks, today we have arrived at the same conclusion that we reached on Friday - the deal will not be able to boost prices in April or May, given the scale of inventory builds we are observing, but it may provide a floor for Brent futures of around $20/bbl in the medium term. The longer-term prospects, however, have suddenly become much brighter, as the revival of OPEC+ means that once demand recovers, output cuts can be used to speed up the market rebalancing process. Today, the EIA's drilling productivity report will be in focus later in the day, in particular its forecast for US tight oil production growth in May. This week, we expect Brent to move toward technical support at $29.8/bbl on disappointment over the OPEC+ deal. A break below could be followed by a drop to $27.1/bbl on potentially downbeat US inventory data and monthly OPEC and IEA LD AT TECHNICAL CROSSROADS AS IT APPROACHES $1,700/OZAfter surging almost $45/oz on Thursday, gold prices fell just short of the $1,690/oz mark and finished the day within the $1,680-1,690/oz range. Trading on the Comex and in London was closed on Friday due to Good Friday. Gold remains in that range so far today but could be eyeing a move toward $1,700/oz. The technical picture, however, shows that gold is more likely now to retrace back to support at $1,657/oz, especially given that it has so far failed to break resistance at $1,702/oz (this level proved to be a particularly tough resistance point a month ago). However it also important to emphasize that a break above $1,702/oz could lead to a gain to $1,740/oz. Note that on Friday, CBR Governor Elvira Nabiullina mentioned that banks were saying that it was harder to export gold because of transportation and logistics problems. However, regarding the CBR's decision at the beginning of April to suspend its gold purchases from banks (such purchases being continued would have boosted domestic demand), she reiterated that the regulator does not comment on its future actions on reserves but reminded that gold purchases were made with rubles (implying that it has become very expensive at the moment).Today, many markets, including London, are closed for Easter Monday. French President Emmanuel Macron will deliver an address to the nation about the Covid-19 outbreak and the government's lockdown policy. This week, US banks will kick off the 1Q20 reporting season, which will become a driver of the S&P 500 and will show the early impact of the virus on the US and global economies. On Thursday, investors will eye US jobless claims. In addition, Chinese GDP and industrial production will be a focus later this