Commodities Daily - August 14, 2020

> Oil dips on downbeat IEA report; economic data on radar today. Today, investors are eyeing a eurozone 2Q20 GDP reading, as well as July US retail sales and industrial production, August University of Michigan consumer sentiment and the Baker Hughes rig count. Though US retail sales are expected to show more moderate growth than June, we expect a beat on the consensus estimate (2.1% y-o-y) thanks to upbeat car sales, which could mean support for oil prices today. On the other hand, the industrial production data is expected to be downbeat. Overall, we think Brent, boosted by another decrease in active US oil rigs, will rise toward technical resistance at $45.5/bbl following a strong setback of $0.40/bbl to $44.8 at the start of the European trading session today.> Gold stabilizes after strong correction, looking for further direction. This morning, gold remains under pressure from a strengthening dollar, and the chances of a retreat to key support at $1,913/oz seem to be rising, especially following the failed break of resistance at $1,968/oz. Potentially upbeat US economic data today - July industrial production and the Michigan consumer sentiment index for August are on tap - could provide additional support for the greenback. Trade negotiations between the US and China are scheduled to resume over the weekend, with the results of the US's formal review of the phase one deal expected to be announced tomorrow. This is a strong risk factor for markets, as it could yield unpredictable outcomes that would echo in Monday's trading.OIL DIPS ON DOWNBEAT IEA REPORT; ECONOMIC DATA ON RADAR TODAYEarly yesterday, front-month Brent traded in a $45.20-45.60/bbl range, but slid during the US trading all the way to $44.80/bbl, pressured principally by a bearish IEA monthly report. Later in the day yesterday, oil investors brushed off the rather upbeat US initial jobless claims, which dropped below 1 mln last week for the first time since the US coronavirus outbreak, though layoffs are still very high. Given the expiration of expanded federal unemployment benefits and the continuing stalemate between Republicans and Democrats over another US economic relief bill, US stock markets were under pressure yesterday. Brent eventually settled at $44.96/bbl, fixing $0.47/bbl below the previous settlement.Yesterday, the IEA cut its global demand estimate for 2020 (having raised it for three months in a row) - it now sees demand averaging 8.08 mln bpd lower y-o-y this year at 91.95 mln bpd (versus its previous forecast of 92.09 mln bpd). The second half of the year saw the biggest downgrades, with jet fuel demand remaining the major source of weakness. On the positive side, the IEA noted a recovery in industry and e-commerce, which has supported trucking. Another bearish note, however, was an upward revision to non-OPEC supply this year, driven by a strong upward revision for Canada. The estimate for 2020 demand for OPEC crude was cut 0.28 mln bpd versus the previous estimate. This was in line with the monthly OPEC report released on Wednesday, implying that OPEC+ has put itself in a risky position by starting to gradually increase production in August. The bottom line, in our view, is that the IEA still sees demand prevailing over supply for the rest of this year as economic activity recovers and OPEC+ keeps production in check; this in turn means that oil prices should keep trending higher amid the fundamental support.This morning, investors are digesting Chinese industrial production and retail sales for July. The main takeaway is that the Chinese recovery continued in July, though it remains uneven: industrial output grew at the same decent 4.8% y-o-y pace as it did in June, while retail sales slid 1.1% y-o-y versus a projected 0.1% increase, indicating that consumption is unable to keep up with the rebound in industrial production. As we have highlighted, further upside for Brent calendar spreads (with the futures curve remaining in contango) depends on the return of aggressive Chinese buying, which we expect to re-emerge later this year.Today, investors are eyeing a eurozone 2Q20 GDP reading, as well as July US retail sales and industrial production, August University of Michigan consumer sentiment and the Baker Hughes rig count. Though US retail sales are expected to show more moderate growth than June, we expect a beat on the consensus estimate (2.1% y-o-y) thanks to upbeat car sales, which could mean support for oil prices today. On the other hand, the industrial production data is expected to be downbeat. Overall, we think Brent, boosted by another decrease in active US oil rigs, will rise toward technical resistance at $45.5/bbl following a strong setback of $0.40/bbl to $44.8 at the start of the European trading session LD STABILIZES AFTER STRONG CORRECTION, LOOKING FOR FURTHER DIRECTIONYesterday, gold made a strong push (to the tune of $45/oz) toward the key technical resistance level of $1,968/oz, which it failed to break, forcing an almost immediate $27/oz correction. Yesterday's improved US weekly jobless claims dataset led to further market chatter that another round of US stimulus is becoming less likely, which in turn appears to have driven some consolidation in late trading yesterday. This morning, gold remains under pressure from a strengthening dollar, and the chances of a retreat to key support at $1,913/oz seem to be rising, especially following the failed break of resistance at $1,968/oz. Potentially upbeat US economic data today - July industrial production and the Michigan consumer sentiment index for August are on tap - could provide additional support for the greenback. Another crucial development to follow now is the uptick in US Treasury yields, which has exerted strong pressure on gold, which is a non-yielding asset. Trade negotiations between the US and China are scheduled to resume over the weekend, with the results of the US's formal review of the phase one deal expected to be announced tomorrow. This is a very strong risk factor for markets, as it could yield unpredictable outcomes that would echo in Monday's trading. Any strong setback in the negotiations would be supportive for the dollar and negative for