Commodities Daily - April 6, 2020

> Oil prices slide as hopes for meaningful OPEC+ deal fade. A move by Saudi Arabia to delay the release of its official crude selling prices over the weekend indicates that it is still willing to take part in OPEC+ talks to show the US that it is attempting to resolve the situation in the oil market. We remain skeptical over the prospects of a new OPEC+ deal, though we would not rule out an agreement completely. If the new cuts do materialize, this would boost sentiment and prices, but not for long, as the cuts would be insufficient to tip the market out of oversupply. This week, we expect Brent to slide toward the lower end of the $29.8-32.0/bbl technical range.> Gold trading above $1,630/oz this morning. Weak data from the US and Europe and the latest CFTC hedge fund positioning data is providing fundamental support to gold. We expect the macro data to continue to disappoint the market over the next 4-5 weeks. We reiterate our recommendation to buy gold with a target of $1,700/oz (see our note from Friday).OIL PRICES SLIDE AS HOPES FOR MEANINGFUL OPEC+ DEAL FADEOn Friday, Brent rallied almost $7/bbl to $35/bbl on hopes of a global output cut deal involving Russia and Saudi Arabia and also the US that could bring down global oil production by 10 mln bpd or more. Front-month Brent eventually settled at $34.11/bbl, fixing $4.17/bbl above the previous settlement. One of the reasons for the optimism on Friday was that Russian President Vladimir Putin acknowledged the need for a deal and said that Russia would be willing to go ahead with cuts if both the US and OPEC were to participate. Meanwhile, it appears Saudi Crown Prince Mohammed bin Salman is under heavy pressure from US President Donald Trump to demonstrate that the kingdom isn't trying to bankrupt the US shale industry. It was also reported that the Canadian province of Alberta, which produces most of the country's oil (Canada produced 5.6 mln bpd last year), would take part in the upcoming OPEC+ conference call, which boosted the prospects of a new deal. However, after a meeting of US oil executives on Friday, from which hints at voluntary cuts were expected to emerge, the hopes for US participation have faded. Following the meeting, Trump indicated that he would leave the matter to the "free markets" and said that it was up to Saudi Arabia and Russia to resolve their issues, which put the viability of a deal into serious question. Furthermore, Trump threatened tariffs on US oil imports, which would support US oil producers but could really hurt US refiners, in our view. Following these reports, the planned meeting of OPEC+ and key G20 producers was pushed back from April 6 to April 9. Meanwhile, Russia-Saudi relations remain strained. As a result, Brent opened almost $4/bbl lower today before beginning to follow global stocks higher.We would like to highlight that Saudi Arabia's move to delay the release of its official crude selling prices over the weekend indicates that it is still willing to take part in OPEC+ talks to show the US that it is attempting to take action. We remain skeptical over the prospects of a new OPEC+ deal, though we would not rule out an agreement completely. If the new cuts do materialize, this would boost sentiment and prices, but not for long, as the cuts would still be insufficient to tip the market out of oversupply. Therefore, if a new deal does materialize, we would recommend selling on the highs. Global storage might be full by the end of April, leading to a price slump that would shut in high-cost production, as a deal would probably not kick in until May. This week, we expect Brent to slide toward the lower end of the $29.8-32.0/bbl technical LD TRADING ABOVE $1,630/OZ THIS MORNINGThe market received a shock on Friday, first from extremely weak PMIs from Asia and Europe, and then from the US nonfarm payroll report. Gold was trading around the $1,610/oz mark. Data from Japan (service sector PMI came in at 33.8 in March, while the composite index was 36.2) helped gold consolidate, which set the stage for further growth during European trading. The composite PMI figure for the eurozone in March was 29.7 points (consensus of 31.4), while the print for the services sector was 26.4 (consensus: 28.2). However, the biggest blow came from the US labor report, which showed a decline of 701k nonfarm payrolls (713k in the private sector), while the unemployment rate surged to 4.4%. Gold climbed following this release and finished the day at $1,620/oz. Friday also saw the release of CFTC data on hedge fund positioning. Total positions (both long and short) for the week ending March 31 dropped by nearly 37% from the levels of late February- early March. This points to a steep drop in speculative activity. Tomorrow, China will report on its international reserves, which will include data on gold holdings. Today, meanwhile, we expect gold prices to continue to climb, perhaps even testing the $1,640/oz