Commodities Daily - August 24, 2020

> Oil under pressure despite hurricane threat in US Gulf of Mexico. This morning, Brent is trading near $44.5/bbl, with investors following Hurricane Marco and Tropical Storm Laura, which have caused energy firms to shut down 1.07 mln bpd (or more than half) of offshore crude oil production in the US Gulf of Mexico. Also supportive for oil prices and risk sentiment is a Bloomberg report in which it is claimed that White House officials are privately telling companies that the implementation of earlier executive orders restricting business with China will be softer than feared. Today, we do not expect any economic data to impact risk sentiment. We think oil price-supportive factors will predominate today and allow Brent to test technical resistance at $45.10/bbl, with the closest technical support at $44.3/bbl. Note that a break below this level could lead to a fall into the $43.6-$44.0/bbl technical range.> Gold approaching $1,950/oz ahead of annual Jackson Hole conference. On Friday, the gold market was driven by strong macro data from the US, with a recovery in investor demand for the metal seen. CFTC data indicated a decline in hedge funds' short positions last week, while ETFs continued to expand their positions. This week, attention will be on Jerome Powell's speech during the Fed symposium (scheduled for Thursday).OIL UNDER PRESSURE DESPITE HURRICANE THREAT IN US GULF OF MEXICOHaving traded close to the $45/bbl mark at the start of the day on Friday, front-month Brent began to slide, falling to an intraday low of $43.60/bbl by the middle of the US trading session. It then managed to pare some of the earlier losses and eventually settle at $44.35/bbl, $0.55/bbl below the previous settlement. A key early negative factor was eurozone PMIs, which, having soared m-o-m in July, indicated that the economic recovery across the continent could have lost momentum in August (particularly in services), possibly dented by demand weakness amid the recently worsening Covid-19 situation. The PMI data did surprise to the downside, but remained above the 50 mark, indicating growth. Meanwhile, Friday's US PMI and housing data was much better than expected. Against this backdrop, the dollar rose, which limited the potential upside for oil prices from the upbeat headline figures. In addition, Friday's Baker Hughes US oil rig count showed a rather unexpected addition of 11 active rigs to 183 - the biggest increase this year. It could be an early sign that US spare production capacity might stage a comeback. The market is also contemplating another potential source of new barrels, which would be difficult to absorb: Libya's national oil company could reportedly restart oil exports, as the country's internationally recognized government in Tripoli has announced a ceasefire in the conflict in the country. However, no agreements with the other proclaimed government in the country have been reached over resuming oil production or exports, so we do not think a breakthrough has been made.This morning, Brent is trading near $44.5/bbl, with investors following Hurricane Marco and Tropical Storm Laura, which have caused energy firms to shut down 1.07 mln bpd (or more than half) of offshore crude oil production in the US Gulf of Mexico. The storms are coming from different directions and Laura, it is thought, has the potential to cause more damage. Also supportive for oil prices and risk sentiment is a Bloomberg report in which it is claimed that White House officials are privately telling companies that the implementation of earlier executive orders restricting business with China will be softer than feared. This story has seemed to outweigh a Washington Post report claiming that the US Congress will resume stimulus talks only next month. Today, we do not expect any economic data to impact risk sentiment, while tomorrow's German 2Q20 GDP reading (10.1% y-o-y contraction expected) will be watched closely, as will US August consumer confidence and new home sales. We think the oil price-supportive factors will predominate today and allow Brent to test technical resistance at $45.10/bbl, with the closest technical support at $44.3/bbl. Note that a break below this level could lead to a fall into the $43.6-$44.0/bbl technical LD APPROACHING $1,950/OZ AHEAD OF ANNUAL JACKSON HOLE CONFERENCEGold came under pressure on Friday morning amid a bout of dollar strength underpinned by macro data from Europe and the US. European PMIs (excluding Germany) reflected a weak economic recovery, while the eurozone manufacturing PMI eased to 51.7 from 51.8 and the services PMI declined from 54.7 to 50.1. The US data was strong, with the Markit manufacturing PMI rising 2.7 points to 53.6 in August and the services PMI climbing from 50.0 to 54.8. US existing home increased to 5.86 mln in July from 4.7 mln in June, above the consensus forecast of 5.4 mln.The reversal in gold was fairly predictable. It slipped from $1,955/oz in the morning to $1,913/oz in the wake of the data and the dollar strengthening. However, the downward movement was short-lived, as gold began to consolidate in a $1,930-1,945/oz range and ended only 0.3% down from the previous close.Gold is approaching $1,950/oz as we write. This week, investor attention will be on Jerome Powell's speech during the Fed symposium (scheduled for Thursday). Sentiment is quite optimistic. ETFs have resumed purchasing bullion and last week bought 108.6 mln oz. CFTC data on hedge fund positions indicated a slight increase in net long positions (to 155k contracts from 150k the previous week), primarily due to a sharp reduction in short positions and a stabilization in open long