Commodities Daily - April 14, 2020

> Oil steady amid official comments on OPEC+ deal and mixed market data. Today, investors will eye the meeting of the Texas Railroad Commission, which regulates the state's oil industry. It will vote on a proposal to cap the state's oil output, which is close to 5 mln bpd. Regardless of how the decision turns out, we do not expect it to have a strong market impact: the decrease already being seen due to the low prices is clearly the major factor behind the US production dynamic. We continue to expect oil prices to gradually drift lower this week. Brent faces technical resistance at $29/bbl and $30.8/bbl.> Gold surges on fears of prolonged coronavirus lockdown in run-up to US corporate earnings. Gold is today on track to test technical resistance at $1,740/oz. It should find support this week from the start of 1Q20 US corporate earnings season, which is very likely to be downbeat and weigh on major stock market indexes. This is should support inflows into safe-haven gold.OIL STEADY AMID OFFICIAL COMMENTS ON OPEC+ DEAL AND MIXED MARKET DATAAfter rising to $33/bbl early yesterday, front-month Brent began to slide and later on consolidated within the $31-32/bbl range. It eventually settled at $31.74/bbl, fixing $0.26/bbl above the previous settlement. Yesterday we noted that some OPEC+ and G20 producers would try 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. Well, yesterday Donald Trump said that "OPEC+ is looking to cut 20 mln bpd, not the 10 mln bpd that is generally being reported." The Saudi energy minister also defended the 19.5 mln bpd production cut figure, saying that nations in the G20 group had pledged to cut around 3.7 mln bpd and that oil purchases for strategic reserves would reach around 200 mln bbl over the next couple of months. Note that 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 and Norway. Officials from those countries sold their expected production declines due to low prices as cuts. Meanwhile major analytical agencies are skeptical of suggestions that 200 mln bbl of strategic reserve purchases globally is possible. Energy Aspects specifically highlighted that stockpiling would have happened without the deal and that almost all tanks (commercial and SPR) will fill up in 2Q20 as demand craters. The market reaction to the "verbal interventions" by Trump and the Saudi minister was subdued, which implies that investors largely remain skeptical that the deal can offset demand losses. Now, oil investors will primarily be eyeing the pace at which global lockdown measures are lifted. On that note, French President Emmanuel Macron yesterday extended the country's lockdown until May 11.Investors were also digesting yesterday's EIA drilling productivity report, which contained a forecast that US tight oil production would drop by almost 0.2 mln bpd in April (the most on record) to about 8.70 mln bpd, which would be followed by a drop in May of 0.18 mln bpd to 8.53 mln bpd. The scale and swiftness of such monthly declines - despite the US having no hard commitments under the new OPEC+ deal - is certainly upbeat for oil prices. Overall US production peaked at 12.9 mln bpd in November 2019, with shale oil production accounting for 9.1 mln bpd of that figure. This morning, data from China's customs agency showed oil imports in March at 9.68 mln bpd, which is below the average of 10.47 mln bpd for the first two months of this year. However, imports in 1Q20 (10.2 mln bpd) ended up coming in 5% higher y-o-y. Most of this addition went into storage, as refiners slashed production in 1Q20 due to coronavirus lockdowns. China currently has the globe's largest remaining commercial storage potential of around 230 mln bbl, although it is being filled quickly. Today, investors will eye the meeting of the Texas Railroad Commission, which regulates the state's oil industry. It will vote on a proposal to cap the state's oil output, which is close to 5 mln bpd. Regardless of how the decision turns out, we do not expect it to have a strong market impact: the decrease already being seen due to the low prices is clearly the major factor behind the US production dynamic. We continue to expect oil prices to gradually drift lower this week. Brent faces technical resistance at $29/bbl and $30.8/bbl. LD SURGES ON FEARS OF PROLONGED CORONAVIRUS LOCKDOWN IN RUN-UP TO US CORPORATE EARNINGSFrom a purely technical perspective, gold found itself at a crossroads yesterday, with an almost equal chance of retracing back to $1,657/oz or rallying to $1,740/oz. As things turned out, it went the latter way, surging around $40/oz to $1,720/oz and posting most of these gains during US trading hours. Today, gold remains on track to test $1,740/oz. It should find support this week from the start of 1Q20 US corporate earnings season, which is very likely to be downbeat and weigh on major stock market indexes. This is should support inflows into the metal.Meanwhile, the coronavirus has now infected more than 1.8 mln people worldwide and killed a total of 113,849 as we write. Countries are generally extending lockdown measures, which will weigh on the global economy even more strongly and cause investors to buy gold. France has announced a month-long extension to its nationwide lockdown. Once the world begins to free itself from the pandemic restrictions, the measures taken by central banks to mitigate the financial toll are likely to boost inflation. Gold usually proves to be a safe store of value when price pressures are rising. Today, the markets will turn their attention to the start of a three-day joint IMF-World Bank meeting, while two regional Fed presidents are scheduled to