Commodities Daily - April 7, 2020

> Oil prices stabilize as investors brace for global output cut deal. The usual OPEC+ group is scheduled to hold a video conference at 17:00 Moscow time on Thursday, which will be followed the next day by talks between G20 energy ministers on potential participation from countries outside OPEC+. Today, investors will examine the monthly EIA oil market outlook, which will include new US oil production forecasts for this year and next. We expect a strong downward revision to last month's numbers, which could support oil prices later today. From a technical perspective, Brent looks neutral in the current $32.0-$34.2/bbl range, where we assume it will remain throughout the day. The API US oil inventory update will be in focus overnight.> Gold prices continue to rise as physical market begins to stabilize. Today it has been reported that gold refining plants in the Swiss canton of Ticino have received permission to reopen. The key event today will be a video conference of EU finance ministers to discuss further steps to combat the effects of the coronavirus. We think gold prices will likely consolidate around the $1,650/oz level after yesterday's 2.5% growth.OIL PRICES STABILIZE AS INVESTORS BRACE FOR GLOBAL OUTPUT CUT DEALAfter ending last week near $35/bbl, front-month Brent began this week at around $30/bbl amid skepticism over a global output cut deal after the OPEC+ meeting was pushed back from Monday toward the end of the week. Furthermore, after a meeting of US oil executives on Friday, from which hints at voluntary cuts were expected to emerge, hopes for US participation had 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. However, after opening lower, Brent started to swiftly pare back its losses and by the European open was already trading at $34/bbl. Support yesterday came from a global stock market rally, reports that OPEC+ talks were still ongoing, and the willingness of both Canada (which produces around 5.6 mln bpd of oil) and Norway (nearly 2 mln bpd) to join in the negotiations. Later on, the rally faded and Brent began to consolidate within a $32-34/bbl range. It eventually settled at $33.05/bbl, fixing $1.06/bbl below the previous settlement.Even though Riyadh and Moscow continue to blame each other for the collapse of the previous deal, we think the two sides are prepared to put their disagreement aside, though sources within OPEC+ are still saying that there will be no deal without the United States. While coordinated action by US oil producers to reduce output in order to boost prices would typically violate antitrust laws, it would be legal if state regulators or the federal government (not producers) were to set lower production levels. Yesterday, US Energy Secretary Dan Brouillette said that US production was already starting to fall due to the plunge in crude prices, highlighting that "in the US we have a free market and the industry will adjust on its own." He wrapped up his interview with Fox Business by saying that "they are going to get together later this week and hopefully end this disagreement that started perhaps two or three weeks ago." During a press briefing on Monday afternoon, Donald Trump said that OPEC had not pressed him to ask US oil producers to reduce their output, saying "if they ask I'll make a decision" and noting that "I'll let you know Thursday evening." Much like the US energy secretary, Trump pointed out that US oil production "had already fallen anyway." The usual OPEC+ group is scheduled to hold a video conference at 17:00 Moscow time on Thursday, which will be followed the next day by talks between G20 energy ministers on potential participation from countries outside OPEC+. Today, investors will examine the monthly EIA oil market outlook, which will include new US oil production forecasts for this year and next. We expect a strong downward revision to last month's numbers, which could support oil prices later today. From a technical perspective, Brent looks neutral in the current $32.0-$34.2/bbl range, where we assume it will remain throughout the day. The API US oil inventory update will be in focus LD PRICES CONTINUE TO RISE AS PHYSICAL MARKET BEGINS TO STABILIZEOptimism held sway in markets yesterday, which buoyed both precious and base metals. Gold climbed 2.5% and silver finished the day 4.3% higher. The physical gold market is slowly stabilizing after the massive cancellation of flights caused logistical issues with deliveries of physical gold, while several refiners in Switzerland, a major European gold refining center, having shut down production only served to exacerbate the situation. Today, however, it was reported that three refineries in the canton of Ticino bordering Italy are relaxing quarantine measures and received the go-ahead to reopen yesterday after two weeks of quarantine. Even though the plants will not be running at full capacity yet (Valcambi and PAMP will be running at 50%, while information for the third, Argor-Heraeus, was not disclosed), this may help combat the bottleneck in the physical market and partially alleviate the deficit of investment-grade gold bars. The key event today will be a video conference of EU finance ministers to discuss further steps to combat the effects of the coronavirus. We think gold prices will likely consolidate around the $1,650/oz level after yesterday's 2.5%