Commodities Daily - April 29, 2020

> Oil stabilizes as many countries move toward easing lockdowns; US 1Q20 GDP and inventory data in focus. This morning, front-month Brent is trading near $21/bbl, while the spot price is still hovering just above $16/bbl. Ahead of the EIA inventory data, oil investors will eye US 1Q20 GDP. We expect the headline reading to surprise to the downside (the consensus is for a 4% contraction). This in tandem with what should be a bearish EIA report (although we think it will be less bearish than in the previous three weeks) could pressure Brent toward $20.5/bbl. A break below that level will likely push Brent down to the $18.7-19.6/bbl range.> Gold prices continue to consolidate around the $1,710/oz mark. Gold prices traded within a range of $1,690-1,720/oz yesterday but ended up closing 0.4% lower. Today, US 1Q20 GDP (15:30 Moscow time) will be in focus and the Fed meeting (21:00) and subsequent press conference with Jerome Powell at 21:30. If the GDP print falls short of the consensus (the Bloomberg estimate is a 4% decline), we think gold prices could bounce up above $1,720.OIL STABILIZES AS MANY COUNTRIES MOVE TOWARD EASING LOCKDOWNS; US 1Q20 GDP AND INVENTORY DATA IN FOCUSAfter sliding $1.3/bbl to an intraday low of $18.7/bbl during Asian trading yesterday, front-month Brent began to pick up momentum following the European open amid a weakening US dollar and buoyant stock markets. Early in the US trading hours, Brent hit an intraday high of $21.3/bbl. The main driver behind the rally in oil prices and risk assets in general was that in some parts of the world an easing of coronavirus-related restrictions are beginning to be announced, which spells a pickup in oil demand. Front-month Brent eventually settled at $20.46/bbl, fixing $0.47/bbl above the previous settlement. Restrictions are gradually being eased in the US (at least 16 states are set to restart business), major European countries (apart from the UK), as well as Australia and New Zealand. In our view, although countries will be gradually lifting the lockdowns in May and June, the world is entering a deep economic recession, so the subsequent recovery in oil demand will no doubt be very gradual. However, the positive news longer-term is that just as demand is bottoming out, oil supply losses (amid OPEC+ cuts and declines due to low prices) are about to accelerate. After that, the subsequent oil supply recovery is likely to lag the rise in demand. This means that the rebalancing process in the oil market could move quickly later this year. Also note that next week Texas energy regulators will vote on a controversial proposal to reduce the state's oil output after delaying the vote due to concerns of legal challenges. According to Reuters, the motion calls for curtailments of 20% of the state's output (around 5 mln bpd). If the measure passes, the curbs would remain in place until the regulator determines that global demand has risen above 85 mln bpd.Overnight, the API reported that US crude stocks surged by 10 mln bbl to 510 mln bbl last week (the EIA's last report put them at 518.6 mln bbl). The high disparity between the API's and EIA's total oil stocks data in the last couple of weeks is a source of concern (so far it seems the API data is strongly lagging the EIA data). The buildup came amid a 0.22 mln bpd increase in imports and despite a 0.01 mln bpd increase in refinery runs. The refined product data was mixed, showing a surprising 1.1 mln bbl draw in gasoline stocks and a 5.5 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 an 11.9 mln bbl build in crude stocks, a 2.5 mln bbl increase in gasoline stocks and a 4.1 mln bbl gain in distillate stocks. We also expect the EIA to report a hefty crude stock build, given that the collapse in refined product demand has dampened refinery activity. This morning, front-month Brent is trading near $21/bbl, while the spot price is still hovering just above $16/bbl. Ahead of the EIA inventory data, oil investors will eye US 1Q20 GDP. We expect the headline reading to surprise to the downside (the consensus is for a 4% contraction). This in tandem with what should be a bearish EIA report (although we think it will be less bearish than in the previous three weeks) could pressure Brent toward $20.5/bbl. A break below that level will likely push Brent down to the $18.7-19.6/bbl LD PRICES CONTINUE TO CONSOLIDATE AROUND THE $1,710/OZ MARKYesterday, trading in gold was moderate. Prices continued consolidating in the $1,690-1,720/oz range and closed 0.4% lower. Today, we expect gold prices to hover around current levels although growth is possible late in the day following the release of US GDP for 1Q20.Investors' attention today will be focused on the US, where the first read on 1Q20 GDP is due. The Bloomberg consensus is calling for a 4% contraction (the US reported GDP growth of 2.1% in 4Q19). We would expect gold to climb above $1,720/oz if the GDP data is worse than expected. Investors are also eagerly awaiting the statement from the Fed meeting (due at 21:00 Moscow time), which will be followed by a press conference with Chairman Jerome Powell (21:30). Our FX analysts believe the Fed could choose to provide a timetable for expanding its lending facilities; the recently passed CARES Act gives it the scope to nearly double the volume (see the FX daily). This would provide additional short-term support for gold later in the