Commodities Daily - December 11, 2020

> Oil spikes on vaccine news, weak dollar, strong demand in India and China. Today, investors will eye November PPI data, the December University of Michigan consumer sentiment index and the weekly Baker Hughes rig count update from the US. Following yesterday's rally, we think oil prices are likely to take a breather today, though we believe a rally beyond resistance at $51/bbl into the $51.3-51.5/bbl range is bound to happen before long. However, we note that the possibility of a no-deal Brexit remains a threat for European oil demand and risk sentiment in general. Also suggesting that a price decline could be coming is the fact that Brent's relative strength index finished in overbought territory yesterday.> Gold prices stabilize after ECB meeting; Brexit trade deal in focus. Investors will be eyeing the US November PPI. US economic growth has been decelerating as rising virus cases have triggered renewed lockdown measures. Nevertheless, inflation data continues to reflect the strong economic rebound in 3Q20. Today, Brexit will also likely be a focus for global markets after UK PM Boris Johnson last night warned that the prospects for a trade deal with the EU are dimming. Market participants will also be looking for comments on US stimulus. We think that gold looks neutral today, set to trade in a $1,828-1,846/oz range, with a breakout likely to suggest the further direction.OIL SPIKES ON VACCINE NEWS, WEAK DOLLAR, STRONG DEMAND IN INDIA AND CHINAAt the start of the day yesterday, front-month Brent was trading around $49/bbl. Then in the early European trading hours it began to climb, peaking at $51/bbl early in the US session. It eventually settled at $50.25/bbl, $1.39/bbl above the previous settlement. Yesterday, crude prices managed to shrug off disappointing US jobs data and a lack of progress on a US stimulus deal, finding support from good news on global vaccinations, which are expected to boost oil demand next year. Yesterday, Pfizer's Covid-19 vaccine, which is the first one expected to be deployed in the US, won the backing of a panel of government advisers, which should help clear the way for emergency authorization by the Food and Drug Administration. We note that on Wednesday Canada became the third country after Britain and Bahrain to give the green light to Pfizer's vaccine, saying that the first shots would be administered across the country next week and that every Canadian would be able to be inoculated as early as the end of next September. Also supporting oil prices yesterday was the dollar recovery coming to a halt after the ECB announced it would expand its QE program by EUR500 bln and extend it by nine months. While this supported risk assets, the extra support was more modest than what many investors had expected.Furthermore, Indian Oil Corporation (IOC) said yesterday that in November crude oil throughput at its refineries had risen to 100% of capacity for the first time since February. This is because fuel demand in India is now close to pre-Covid levels. IOC has also issued a slew of tenders, with the latest seeking prompt crude from the US and Middle East. Along with its subsidiary Chennai Petroleum Corp, IOC controls about a third of the 5 mln bpd refining capacity in India, where fuel demand in October rose by 2.5% y-o-y, the first increase in eight months. Bloomberg, meanwhile, has reported that China's private refiners are trying to get ahead of the crowd with their crude purchases, a sign that Asian physical demand will remain strong for at least another month. It also noted that Asian buyers last month were forced to outbid each other in the spot market to secure supplies from Russia, the US and the Middle East.Today, investors will eye November PPI data, the December University of Michigan consumer sentiment index and the weekly Baker Hughes rig count update from the US. Following yesterday's rally, we think oil prices are likely to take a breather today, though we believe a rally beyond resistance at $51/bbl into the $51.3-51.5/bbl range is bound to happen before long. However, we note that the possibility of a no-deal Brexit remains a threat for European oil demand and risk sentiment in general, as yesterday British Prime Minister Boris Johnson said there was "a strong possibility" Britain and the EU would fail to strike a trade deal. Also suggesting that a price decline could be coming is the fact that Brent's relative strength index finished in overbought territory yesterday.GOLD PRICES STABILIZE AFTER ECB MEETING; BREXIT TRADE DEAL IN FOCUSYesterday, gold traded sideways in a $1,830-1,850/oz range, drawing support from a surge in EUR/USD. The dollar recovery that had just started on Wednesday came to an end yesterday, with the ECB deciding to expand its QE program by EUR500 bln and extend it by nine months, which supported risk assets, though the decision turned out more modest than what many investors had expected. More weaker-than-expected US employment data raised hopes for the passage of more fiscal stimulus, but later in the day the hopes were disappointed by downbeat comments from officials. Meanwhile, the emergence of vaccines and vaccination programs continued to chip away at the uncertainty around the pandemic and weigh on gold prices, as Pfizer's vaccine won the backing of a panel of government advisers, which will likely mean emergency authorization by the FDA. On Wednesday, recall that Canada became the third country after the UK and Bahrain to green-light Pfizer's vaccine, announcing a program to vaccinate every Canadian by as early as end-September.There are no important events on the calendar today. Investors will be eyeing the US November PPI data and December University of Michigan consumer sentiment. Producer prices are expected to have risen slightly in November following a modest uptick in October. US economic growth has been decelerating as rising virus cases have triggered renewed lockdown measures. Nevertheless, inflation data continues to reflect the strong economic rebound in 3Q20. Today, Brexit will also likely be a focus for global markets after UK PM Boris Johnson last night warned that the prospects for a trade deal with the EU are dimming. Market participants will also be looking for comments on US stimulus. We think that gold looks neutral today, set to trade in a $1,828-1,846/oz range, with a breakout likely to suggest the further direction.