Commodities Daily - April 22, 2020

> Oil prices keep plummeting on market oversupply; US inventory data in focus. This morning, Brent plunged to $16/bbl, brushing off the US Senate's approval of nearly $500 bln in new stimulus. Today, we expect Brent to keep falling as it heads toward its next technical support level of $15.6/bbl. This would mean that it will keep converging with physical market spot prices (dated Brent plunged to $13.2/bbl yesterday) as it nears expiry next week. Additional pressure could come from today's EIA report of yet another hefty crude stock build due to subdued refinery activity amid the collapse in refined product demand.> Gold remains below $1,700/oz amid strengthening dollar. Today's technical picture suggests that gold could revisit yesterday's lows. The main driver behind such a move could be another US stimulus bill working its way through Congress, this one worth some $484 bln, including more than $300 bln to top up the already exhausted relief program for small businesses.OIL PRICES KEEP PLUMMETING ON MARKET OVERSUPPLY; US INVENTORY DATA IN FOCUSAfter trading near $26/bbl at the start of the day yesterday, the front-month Brent contract for June started to plummet and was doing so throughout the day, hitting an intraday low at $17.5/bbl. Later on it managed to pare back some of its losses and eventually settled at $19.33/bbl, fixing $6.24/bbl below the previous settlement. Selling pressure in Brent intensified after the WTI May contract slid into negative territory, which was a sobering trigger for investors to realize the full extent of the collapse in oil demand due to the lockdowns. Furthermore, yesterday Vopak, the world's biggest independent oil storage company, stated that "the available capacity on the oil side is almost completely sold out for our terminals" and also noted that "elsewhere in the world we're not the only ones." This served to intensify the oil selling frenzy. Exchange operator CME Group noted that yesterday it had the busiest day in history, with a record daily high of more than 2 mln contracts for US crude for June delivery exchanging hands. Yesterday's continuous oil price tumble was briefly halted by reports that Saudi Arabia is ready to take extra measures to stabilize oil markets along with OPEC+ allies and other oil producers. In addition, the Kremlin highlighted that OPEC+ negotiations might be resumed if needed. OPEC+ yesterday held an unscheduled conference call to discuss the rout, during which some ministers proposed implementing the deal immediately without waiting until May, though the closing statement signaled that new policy measures had been agreed to. We think that in the current market an updated OPEC+ deal is even likely, although in our view this would have a very limited market impact as long as lockdowns remain in place globally. Furthermore, yesterday the US Texas Railroad Commission (the regulator for Texas's 5 mln bpd industry) opted to put off a decision on whether to impose oil production quotas, while the Trump administration vowed to rescue the industry with stimulus funds and other measures.Overnight, the API reported that US crude stocks surged by 13 mln bbl to 500 mln bbl last week (the EIA's last report put them at 503.6 mln bbl). The buildup came amid a 0.13 mln bpd increase in imports and a 0.1 mln bpd decrease in refinery runs. The refined product data was also bearish, showing a 3.4 mln bbl gain in gasoline stocks and a 7.6 mln bbl increase in distillate inventories. Investors are now positioning themselves for the EIA report due today at 17:30 Moscow time. The Bloomberg consensus suggests a 14.4 mln bbl build in crude stocks, a 4.75 mln bbl increase in gasoline stocks and a 3.7 mln bbl gain in distillate stocks. We also expect the EIA to report a hefty crude stock build due to subdued refinery activity given the collapse in refined product demand. Investors will also focus on the rate of total (oil and products) stock builds. This morning, Brent plunged to $16/bbl, brushing off the US Senate's approval of nearly $500 bln in new stimulus measures. Today, we expect Brent to keep falling as it heads toward its next technical support level of $15.6/bbl. This would mean that it will keep converging with physical market spot prices (dated Brent plunged to $13.2/bbl yesterday) as it nears expiry next LD REMAINS BELOW $1,700/OZ AMID STRENGTHENING DOLLARAfter sliding below $1,700/oz late last week, gold prices have remained below this threshold so far this week, having failed to break above it on one attempt on Monday. Midday yesterday, gold plunged almost $65/oz to $1,665/oz on a strengthening dollar. With the two assets now battling for safe-haven flows, the correction was attributable to a run for cash (via eliminating positions in gold) to cover losses in other asset classes mainly driven by the recent plunge in oil prices. Later in the day yesterday, however, gold futures climbed as investors weighed the impact of the global energy market turmoil. In addition, there were further inflows into gold-backed ETFs, which were up for the 22nd straight day yesterday. As we expected and noted last week, gold has indeed started to decouple from equities. Risk appetite is now deteriorating and stock markets trending lower after the US crude oil contract for May plunged below zero for the first time ever on Monday. The low oil prices are weighing on the energy stocks in the S&P 500, dragging the rest of the index down with them. Gold prices, however, are not following this downtrend, remaining relatively stable. Without a strengthening dollar yesterday, we think gold would be trading above the $1,700/oz mark. Nevertheless, today's technical picture suggests that gold could revisit yesterday's lows. The main driver behind such a move could be another US stimulus bill working its way through Congress, this one worth some $484 bln, including more than $300 bln to top up the already exhausted relief program for small