Commodities Daily - August 19, 2020

> Oil slides on demand fears and signs of rising US gasoline stocks; OPEC+ meeting and EIA data on the radar. Ahead of the EIA inventory report today investors will be following a virtual OPEC+ meeting, which is not expected to result in any major decisions to alter output; the focus will rather be on compliance issues. As for the EIA inventory report, we expect a minor crude oil stock draw of around 1 mln bbl amid slightly higher refinery runs and exports. More important, however, will be the refined product inventory data, which, based on what we saw from the API, is very likely to be disappointing as the US driving season draws to a close. We therefore see a high risk of Brent today testing support at $44.8/bbl following the EIA data release, with a break below likely to cause a fall to $44.4/bbl.> Gold slides after failing to break above important resistance ahead of Fed minutes. Gold is on the defensive as we write and has retreated to $1,982/oz, although it has again resisted breaking below this mark. Bullion has essentially dropped out of bullish territory after failing to break above $2,014/oz yesterday, and it is now very sensitive to any signs of dollar strength and is closely mirroring the S&P 500. Bullion is at high risk of extending its losses and testing technical support at $1,978/oz. If it breaks below this level, the next target is $1,935/oz. A move above $2,014/oz is needed to restore the bullish view. One factor that could boost gold toward this mark today would be the US Republicans possibly unveiling a new stimulus proposal, which would likely be slightly positive for global equities and negative for the dollar.OIL SLIDES ON DEMAND FEARS AND SIGNS OF RISING US GASOLINE STOCKS; OPEC+ MEETING AND EIA DATA ON THE RADARAfter trading sideways within a $45.1-45.5/bbl range early yesterday, front-month Brent slid $0.6/bbl toward the $44.8/bbl mark ahead of the Wall Street open. This correction coincided with German Chancellor Angela Merkel's having ruled out any further loosening of virus measures, citing the doubling in the number of daily cases in Germany over the last three weeks. Note that yesterday Europe's largest economy recorded the highest number of new coronavirus cases in nearly four months, which fueled fears of a resurgence of infections across the continent. European officials in Italy, Spain and Greece are already retightening restrictions on movement in an effort to prevent summer partying and travel from spreading the disease. This casts doubt over the prospects for the global oil demand recovery. In July, Europe had been one of the bright global spots, with traffic having almost recovered to pre-pandemic levels. Meanwhile, during US trading hours, Brent mirrored stock market momentum, which rallied later in the day as strong corporate results and accelerating US homebuilding lifted the S&P 500 above pre-pandemic levels. Brent eventually settled at $45.46/bbl, fixing $0.09/bbl above the previous settlement.Overnight, the API reported that US crude stocks fell 4.3 mln bbl to 512 mln bbl last week (versus the EIA's latest figure of 514 mln bbl). The draw came amid a 0.15 mln bpd increase in refinery runs and despite a 0.14 mln bpd increase in imports. Crude stocks at Cushing fell 0.6 mln bbl. The refined product data was mostly downbeat, showing a strong 5 mln bbl build in gasoline stocks and a 0.96 mln bbl decrease in distillate inventories. Investors are now positioning for the EIA inventory report today at 17:30 Moscow time. The Bloomberg consensus is calling for a 2.85 mln bbl crude stock draw, a 1 mln bbl decrease in gasoline inventories and a 1.2 mln bbl decrease in distillate stocks. Ahead of the EIA inventory report today investors will be following a virtual OPEC+ meeting, which is not expected to result in any major decisions to alter output; the focus will rather be on compliance issues. We also expect some upbeat market commentary by oil ministers to reassure investors of their commitment to ensure a successful market rebalancing down the line.As for the EIA inventory report, we expect a minor crude oil stock draw of around 1 mln bbl amid slightly higher refinery runs and exports. More important, however, will be the refined product inventory data, which, based on what we saw from the API, is very likely to be disappointing as the US driving season draws to a close. There is a high risk that today's data will derail what seemed to be a steady slide in total US oil and refined product stockpiles. Such an outcome would weigh on prices today. We therefore see a high risk of Brent today testing support at $44.8/bbl following the EIA data release, with a break below likely to cause a fall to $44.4/bbl. The technical range of $43.2-$43.8/bbl would represent further downside. The chances of Brent even retesting technical resistance at $45.6/bbl today look slim, not to mention a break above to the next resistance level at $46.3/ LD SLIDES AFTER FAILING TO BREAK ABOVE IMPORTANT RESISTANCE AHEAD OF FED MINUTESGold plummeted to as low as $1,863/oz last week but has been recovering in recent days on dip buying amid a positive year-end outlook for the yellow metal, as central banks remain ultra-dovish and governments are providing more and more fiscal support. Yesterday, however, the recovery stalled at the $2,014/oz mark, and gold retreated all the way back to $1,982/oz at the opening in New York amid a brief bout of dollar strength and a stock market selloff. Very upbeat US July housing starts provided some short-lived support for the greenback at the start of the Wall Street session. They rose 22.6% m-o-m versus an expected gain of 5.0%, while the June data was also revised higher. Gold eventually returned above the $2,000/oz mark as the dollar softened on news that US Democrats are more willing to compromise with Republicans on the size of the next stimulus plan.Gold is on the defensive as we write and has retreated to $1,982/oz, although it has again resisted breaking below this mark. Bullion has essentially dropped out of bullish territory after failing to break above $2,014/oz yesterday, and it is now very sensitive to any signs of dollar strength and is closely mirroring the S&P 500. Bullion is at a high risk of extending its losses and testing technical support at $1,978/oz. If it breaks below this level, the next target is $1,935/oz. A move above $2,014/oz is needed to restore the bullish view. One factor that could boost gold toward this mark today would be the US Republicans possibly unveiling a new stimulus proposal, which would likely be slightly positive for global equities and negative for the