Commodities Daily - April 30, 2020

> Oil prices surge on rising demand and falling supply. Brent spiked to as high as $25/bbl this morning amid reports that Norway will join the oil production cuts and comments from US Treasury Secretary Steven Mnuchin, who said that the US could store another "several hundred million" barrels of oil. Today, the EIA will publish its monthly production report containing oil production data for February. The technical picture for today suggests that the Brent June contract, which expires today, could climb to the $25.3-26.0/bbl range, but we remain skeptical of this and expect it to resume falling amid fundamental market weakness, with global stock market momentum also being a major driving force.> Gold climbs $10/oz this morning to approach $1,720/oz. Today will see a raft of data from Europe and the US, and we expect generally weak numbers to push gold up to $1,730/oz. At noon Moscow time, EU GDP for 1Q20 will be published, which will be followed by US initial jobless claims and personal incomes and outlays (15:30). Today's ECB meeting is unlikely to bring many surprises, and investor attention has turned to the World Gold Council's 1Q20 report, which indicated a significant imbalance between investor and retail demand.OIL PRICES SURGE ON RISING DEMAND AND FALLING SUPPLYFront-month Brent was trading around the $21/bbl mark yesterday morning before gaining almost $3/bbl around midday amid stock market tailwinds and reaching just shy of the $24/bbl mark in early Wall Street trading. Investors brushed off downbeat US GDP data (an important gauge of oil demand) for 1Q20 that showed an annualized decline of 4.8%, considering it to be a backward-looking indicator under the current conditions. US economic activity declined sharply in the second half of March, when the lockdowns began. Later yesterday, attention turned to the EIA's weekly report on US oil and refined product inventories, which showed yet another strong (although not as strong as in the last few weeks) weekly build in oil stocks of 8.99 mln bbl to 527.6 mln bbl. This comes amid further subdued refining activity (though refinery inputs were up 0.3 mln bpd this time to 12.76 mln bpd), with a 0.36 mln bpd increase in imports to 5.3 mln bpd supporting stock builds. A weekly 2.89 mln bpd increase in exports to 3.3 mln bpd and a 0.1 mln bpd decrease in crude oil production to 12.1 mln bpd were insufficient to offset the oil inventory increase. Inventories at Cushing, the WTI delivery hub, are nearly full at 63.4 mln bbl, with much of the remainder (around 10 mln bbl) leased already. Overnight, Treasury Secretary Steven Mnuchin said "we're also exploring potentially having the ability to store another several hundred million barrels," while Donald Trump described helping the oil industry as a top priority.The biggest positive surprise was a strong 3.67 mln bbl decrease in gasoline stocks to 259.6 mln bbl, as refineries continued to cut production and imports remained well below normal. However, a 0.55 mln bpd w-o-w increase in implied demand provided hope that drivers are returning to the roads. Distillate stocks were up 5 mln bbl to 142 mln bbl, with total petroleum stockpiles remaining on the rise (albeit now at a slower pace) amid this unprecedented period of demand destruction. Total commercial inventories (oil and refined products combined) were up 10.4 mln bbl. Investors liked the overall picture at first glance (especially in the refined products category), with Brent rising to an intraday high of $23.88/bbl straight after the release. Later in the day, prices eased as investors once again acknowledged the massive global oil glut (43 mln bbl of Saudi crude is currently bearing down on the US) that will need to be cleared before there can be any meaningful recovery. Front-month Brent eventually settled at $22.54/bbl, $2.08/bbl above the previous settlement.This morning, Brent spiked to as high as $25/bbl amid reports that Norway will join the oil production cuts by reducing output by 0.25 mln bpd in June and 0.134 mln bpd in 2H20 (from a reference level of 1.86 mln bpd). Previously, the country's output had been on course to climb 0.4 mln bpd this year. Yesterday, Russian Energy Minister Alexander Novak said that Russian oil producers will cut crude output (excluding condensate) by 19% from the February level, or by 2 mln bpd. There were also upbeat reports on Bloomberg that road traffic data over the past seven days in Beijing and Shenzhen (34 mln people combined) is showing heavier rush-hour congestion than in the same period last year. Today, the EIA will publish its monthly production report containing oil production data for February. The technical picture for today suggests that the Brent June contract, which expires today, could climb to the $25.3-26.0/bbl range, but we remain skeptical of this and expect it to resume falling amid fundamental market weakness, with global stock market momentum also being a major driving LD CLIMBS $10/OZ THIS MORNING TO APPROACH $1,720/OZGold continues to trade in a $1,690-1,720/oz range, but we expect it to break higher today and head toward $1,730/oz amid a series of data from Europe and the US. We expect 1Q20 EU GDP (noon Moscow time), Italian GDP (13:00) and US initial jobless claims and personal incomes and outlays today (15:30) to be weak across the board.This morning, the World Gold Council released its quarterly report on demand trends. Jewelry demand in India and China has hit a rut due to the coronavirus. Jewelry demand in China slumped 65% y-o-y in 1Q20 to 64 tonnes, while demand in India, where a quarantine began in the second half of March, dropped 41% to 74 tonnes. These drops were entirely offset by increased investment demand for the metal, with ETF demand surging by 300 tonnes. Given the high elasticity of investment demand, this performance is unlikely to remain in place over the medium term (until the year-end of 2020), meaning that the physical market is only likely to balance once demand in Asia has been