Commodities Daily - April 17, 2020

> Oil holds steady amid bearish OPEC report and Trump's plan to end coronavirus shutdown. This morning, Brent was moving up toward $29/bbl following US President Trump's overnight policy announcement to combat Covid-19 and reopen the economy. The US administration announced that states would be responsible for evaluating their own needs, and guidelines would allow a gradual reopening in as little as four weeks for those where evidence suggests the virus has been beaten. Despite this morning's stock market rally, we think weak fundamentals are likely to push Brent below the $27.3/bbl support level today. The bias is still toward the downside, and the next technical support at $23.7/bbl could come into view next week.> Gold prices fall as US economy restart falls into view. The guidelines presented by Donald Trump yesterday to reopen the economy strongly supported stock markets and weighed on gold. So far, gold is trading in line with the technicals, a trend that we outlined yesterday (highlighting that it was likely to retreat back to the $1,675-1,701/oz range that it was trading within not long ago). We think that today it could even test the lower end of that corridor.OIL HOLDS STEADY AMID BEARISH OPEC REPORT AND TRUMP'S PLAN TO END CORONAVIRUS SHUTDOWNFront-month Brent was trading within a $27.2-29.0/bbl range yesterday, for a second day in a row managing to avoid securing below the $27.3/bbl technical support level we have been outlining this week. It eventually settled at $27.82/bbl, $0.13/bbl above the previous settlement. The spot market for Brent and Urals in the North Sea and in the major European markets of Amsterdam, Rotterdam and Antwerp is trading at a discount of around $10/bbl to Brent June futures, underlining the massive scale of the physical market oversupply. Around midday yesterday, investors received the monthly oil market outlook by the OPEC secretariat. Similarly to the IEA report released a day earlier, OPEC made a massive downward revision to its global demand estimate for this year. It now expects it to fall 6.91 mln bpd to 92.82 mln bpd (down from 0.06 mln bpd growth to 99.73 mln bpd). Demand for its own crude this year (the so-called "call on OPEC crude") was revised down by 3.65 mln bpd as the substantial downgrade in demand will outpace the drop in non-OPEC supply (which is forecast to fall 1.5 mln bpd y-o-y this year). The call on OPEC crude is forecast to drop to a low of 19.73 mln bpd in 2Q20 before recovering to 26.79 mln bpd in 3Q20 and then peaking at 30.01 mln bpd in 4Q20 as the lockdown measures are lifted. This is in line with what we were saying during the recent OPEC+ negotiations: that given the scale of the global lockdowns and inventory builds, the cuts would be insufficient to boost prices in April or May. However, the longer-term prospects have 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. Yesterday's OPEC report also highlighted that "downward risks remain significant, suggesting the possibility of further adjustments, especially in the second quarter." Furthermore, in a joint statement yesterday, Saudi Arabia and Russia said that they will continue to closely monitor the oil market and are prepared to take further measures jointly with OPEC+ and other producers if these are deemed necessary. We think deeper OPEC+ cuts will indeed be likely if Brent futures fall closer to $20/bbl.This morning, Brent was moving up toward $29/bbl following US President Trump's overnight policy announcement to combat Covid-19 and reopen the economy. The US administration announced that states would be responsible for evaluating their own needs, and that the guidelines would allow a gradual reopening in as little as four weeks for those where evidence suggests the virus has been beaten. This development has so far overshadowed news that China's economy shrank 6.8% y-o-y in 1Q20 (below the consensus forecast of a 6.5% drop) and was down 9.8% Q-o-Q, which according to Reuters is the first decline since at least 1992, when quarterly GDP records began. China also reported that industrial output dipped slightly in March. This is upbeat in terms of oil demand as it implies that the country's manufacturing sector is likely to recover quickly. Despite this morning's stock market rally, we think weak fundamentals are likely to push Brent below the $27.3/bbl support level today. The bias is still toward the downside, and the next technical support at $23.7/bbl could come into view next LD PRICES FALL AS US ECONOMY RESTART COMES INTO VIEWAfter a $25/oz rally towards $1,740/oz during the first half of the day yesterday, gold prices fell sharply to $1,720/oz following the release of the US jobless claims data. Weekly jobless claims came in at 5.2 mln last week, down from the 6.6 mln the previous week. This puts the total figure over the past month at over 20 mln, implying a 15% unemployment rate, a level last seen during the Great Depression. Later in the day, gold prices slid even lower and finished the day oscillating within the $1,710-1,720/oz range. This morning gold fell to as low as $1,690/oz following US President Donald Trump's unveiling of a roadmap to reopen the economy. The US administration announced that states would be responsible for evaluating their own needs and that the guidelines would allow for a gradual reopening in as little as four weeks in those states where evidence suggests the virus has been beaten. This balances between providing a slightly optimistic overall message while also leaving decisions to local officials. The news strongly supported stock markets and weighed on gold. So far, gold is trading in line with the technicals, a trend that we outlined yesterday (highlighting that it was likely to retreat back to the $1,675-1,701/oz range that it was trading within not long ago). We think that today it could even test the lower end of that