Commodities Daily - December 14, 2020

> Oil prices stabilize ahead of monthly OPEC oil market report. This morning, oil investors have been upbeat amid the rollout of the first Covid-19 vaccine in the US. Both the OPEC monthly oil market report and the EIA monthly drilling productivity report are due today. The latter will give us a forecast of US shale oil production in January. In our view, price risks are skewed to the upside today, as we believe the OPEC report will likely contain an upward revision to last month's 2021 oil demand estimate, given the recent upbeat vaccine developments. In our view, Brent could test resistance at $51.1/bbl today. If it eventually manages to break above this level, it will likely begin to consolidate within the $51.3-51.5/bbl technical range.> Gold stable amid Brexit trade deal uncertainty with eyes on US fiscal stimulus deal. We think this week's busy calendar will bring elevated volatility for gold, with strong support near $1,827/oz. A break above resistance at $1,846/oz could pave the way to $1,861/oz.OIL PRICES STABILIZE AHEAD OF MONTHLY OPEC OIL MARKET REPORTAfter trading near $50.5/bbl during the first half of the day Friday, front-month Brent began to ease toward $50/bbl. It eventually settled at $49.97/bbl, $0.28/bbl below the previous settlement. One key source of pressure was growing concern over demand, which was exacerbated by reports that New York City restaurants would be forced to shut down indoor dining starting today. Further mild pressure came from a 12-unit jump in the Baker Hughes US active oil rig count to 258. While daily US crude oil production has recovered from the more than two-year lows touched in May, the EIA projected that the average for the year would be down 0.91 mln bpd at 11.34 mln bpd in its oil market report last week.This morning, oil investors have been upbeat amid the rollout of the first Covid-19 vaccine in the US. Moreover, it was reported on Sunday that there had been an explosion on an oil tanker near the Saudi Arabian port city of Jeddah. The incident highlighted the potential for supply disruptions in the region and came three weeks after an oil tanker was damaged in a possible attack at the Saudi Shuqaiq terminal. Both the OPEC monthly oil market report and the EIA monthly drilling productivity report are due today. The latter will give us a forecast of US shale oil production in January. In our view, price risks are skewed to the upside today, as we believe the OPEC report will likely contain an upward revision to last month's 2021 oil demand estimate given the recent vaccine developments. In our view, Brent could test resistance at $51.1/bbl today. If it manages to break above this level, it will likely begin to consolidate within the $51.3-51.5/bbl technical range.Data releases dominate this week's agenda, with the IEA monthly oil market report and Chinese November industrial production (including crude and refining output data) both due for release tomorrow, along with US November industrial production data. This year's post-lockdown rebound has been driven in large part by China's strong, state-aided recovery from the 1Q20 mauling delivered by the pandemic. Thanks to heavy investment in infrastructure, China is the only major economy that has seen a sustained rebound this year. Tuesday's industrial output data should give hints of what to expect in 2021.The OPEC+ JMMC meets on Wednesday (a day earlier than originally planned) to discuss the outlook heading into next year. A press conference with the Saudi and Russian energy ministers could follow. Key group members like Saudi Arabia and Russia could drop hints on the next full ministerial meeting on January 4, where it will be discussed whether OPEC+ should release another 0.5 mln bpd into the market in February. Global stockpiles remain high, and a battle for market share in Asia may be coming to a head. Wednesday will also see preliminary December PMI data from DMs, the EIA's weekly inventory update (following the massive builds last week), November retail sales from the US and the end of the two-day Fed meeting, during which the continued spread of the coronavirus will be weighed against the rapid progress on vaccines. We think Brent will move above $50/bbl this week but probably won't be able to make it beyond $51.3-51.5/bbl.GOLD STABLE AMID BREXIT TRADE DEAL UNCERTAINTY WITH EYES ON US FISCAL STIMULUS DEALGold traded sideways within a $1,827-1,846/oz range on Friday, despite a strong dollar headwind, with the greenback strengthening sharply, particularly against the pound amid pessimistic comments about the prospects for a post-Brexit trade deal, the deadline for which was this past weekend. Gold tends to benefit from this sort of uncertainty, though on Friday it was pressured by the resulting dollar strengthening.This morning, moderate optimism is prevailing in global markets. The deadline for a UK-EU trade deal has once again been extended, buoying both the pound and the euro. Gold is trending lower toward the $1,830/oz mark despite an uptick in EUR/USD. One thing reducing the uncertainty factor for gold is the scheduled start of mass vaccinations in the US today, which is allowing investors to look beyond the difficult virus situation there. The US and Germany are both seeing daily infections near record highs, with the latter now tightening quarantine measures.Delegates to the US Electoral College will today cast their votes for the US president. With the vast majority bound by law or social mores to vote for the winner of the popular vote in their states, the event is more symbolic than anything and will be the last formal event in the election process until a Congressional committee reviews the Electoral College outcome on January 6. Meanwhile, Bloomberg is reporting that a bipartisan group in Congress will present a $908 bln compromise stimulus package today. The markets have long priced in more stimulus in the US, but it is unclear whether the bill will be supported by the two US parties. If it is, then gold could receive a strong boost.Central banks will be in focus this week, with rate decisions due from the Fed on Wednesday and the BoE on Thursday. The Fed's final policy meeting of the year will highlight whether the world's most powerful central bank will augment the unprecedented wave of stimulus it unleashed this year to combat the pandemic. The statement, as well as Chairman Jerome Powell's press conference, will set the Fed's tone for the opening half of 2021. The FOMC could shift asset purchases toward buying longer-term Treasuries, although that move would likely come in January, not this month. Another major change to the statement could be an acknowledgment that vaccines might bring forward recovery expectations. We think this week's busy calendar will bring elevated volatility for gold, with strong support near $1,827/oz. A break above resistance at $1,846/oz could pave the way to $1,861/oz.