Commodities Daily - August 25, 2020

> Oil prices rise as US Gulf Coast storms force more production to be shut. Today, investors await US housing prices, new home sales and consumer confidence. We think the lowest point Brent could retreat to today is technical support at $44.6/bbl, though we expect the array of US data to be upbeat, which could push Brent above strong technical resistance at $45.2/bbl, despite dollar headwinds. This would be likely to see it consolidate within the $45.6-$46.2/bbl technical range. Further momentum will be determined by US oil and refined product inventory data, with the API dues to release its figures overnight.> Gold under pressure for second day straight, drops 0.6% to $1,929/oz. Optimism is currently prevailing in global markets, which has weighed on demand for defensive assets. A key focus of investors yesterday was the resumed trade talks between the US and China, which both sides indicated were rather constructive. Today, US macro data will be in the spotlight, including housing price data at 16:00 Moscow time, and then new home sales and consumer confidence at 17:00. OIL PRICES RISE AS US GULF COAST STORMS FORCE MORE PRODUCTION TO BE SHUTFront-month Brent slid to as low as $44.3/bbl in the final hours of yesterday's Asian trading session before climbing back above the $45/bbl mark in late US trading and settling at $45.13/bbl, up $0.7/bbl on the day. The main supportive factors at play are Hurricane Marco and Tropical Storm Laura, which caused energy firms to initially shut down 1.07 mln bpd (or more than half) of offshore crude oil production in the US Gulf of Mexico. The latest reports suggest that Marco has faded, with safety warnings dropped, while Laura is set to be upgraded to a hurricane and is expected to make landfall on Thursday, menacing crude production and refineries in the gulf. The governor of Louisiana has even told citizens that Laura could rival 2005's Hurricane Rita, one of the fiercest recorded in the gulf.The latest developments have caused producers to deepen the output cuts, and they have now shut more than 1.5 mln bpd of Gulf Coast offshore oil production (around 82% of oil output in the gulf), nearly 14% of the nation's total output. Bloomberg has reported that refinery closures from companies including Motiva Enterprises and Valero Energy could remove more than 1 mln bpd of capacity before the storm threat passes. According to Reuters, Motiva Enterprises (owned by Saudi Aramco) has already begun shutting the 0.607 mln bpd Port Arthur refinery in Texas, which is the largest in the US. This will cause strong disruptions to all parts of the US crude oil balance, including imports and exports, and we expect more supplies to be lost via lost crude demand from lower refinery operations, providing support to WTI in the near term and helping to draw down bloated inventories.Oil has also found support from news that US and Chinese trade officials have reaffirmed their commitment to the phase one trade deal, which has seen China lagging in its obligations to buy US goods. Chinese crude purchases remain key to turning the crude market around, which we still believe will occur before the November buying cycle. Recent meager Chinese buying of non-US spot crudes (China has accelerated US crude purchases ahead of trade deal talks) has resulted in a widening contango in Brent. Today, investors await US housing prices, new home sales and consumer confidence. We think view the lowest point Brent could retreat to today is technical support at $44.6/bbl, though we expect the array of US data to be upbeat, which could push Brent above strong technical resistance at $45.2/bbl, despite dollar headwinds. This would likely see it consolidate within the $45.6-$46.2/bbl technical range. Further momentum will be determined by US oil and refined product inventory data, with the API dues to release its figures LD UNDER PRESSURE FOR SECOND DAY STRAIGHT, DROPS 0.6% TO $1,929/OZDefensive assets came under pressure yesterday as the US trading session got underway. The US 10y Treasury yield edged up 3 bps to 0.66%, while gold dropped to $1,929/oz, from around $1,960/oz early in the session. The main focus yesterday was a conference call between US and Chinese officials to discuss progress on their trade deal (the call had originally been scheduled for August 15 but was postponed). Among those taking part in the renewed trade talks were US Trade Representative Robert Lighthizer, US Treasury Secretary Steven Mnuchin and Chinese Vice Premier Liu He. After the conversation wrapped up, statements were released indicating that both sides believed progress had been made toward fulfilling the terms of the deal and that they would continue to work together on implementing the agreement. The markets took this positively, which helped the dollar to strengthen and US stocks to close in positive territory.The main focus in the gold market today is global macro data. The August Ifo survey released in Germany earlier today was strong across the board, with the business climate index, the current assessment index and the business expectations index all printing above the July levels. In the US, housing price data is due at 16:00 Moscow time, followed by new home sales and consumer confidence at 17:00. In the absence of catalysts, gold prices are likely to consolidate in the $1,935-1,950/oz