Commodities Daily - December 18, 2020

> Oil stabilizes, with focus on US lawmakers finalizing stimulus package deal. Today, important economic releases are thin on the ground, so investors are likely to focus on the German IFO expectations index, an early indicator of current conditions and business expectations for the next six months, as well as on the weekly Baker Hughes rig count. The market will also be keeping an eye out for US congressional leaders working through the final sticking points of a coronavirus relief deal. We expect oil to keep tracking the dollar and major stock market indexes and consolidate around $51/bbl for the rest of the day.> Gold prices rise with $1,900/oz barrier now in sight. This morning, gold has slid closer to $1,880/oz after Reuters reported that the US government's ban on buying Chinese securities will be expanded by another 80 companies as soon as today. Today, investors will eye Germany's Ifo surveys and US leading indicators. In our view, gold is still most likely to hold in the current $1,881-1,899/oz technical corridor today amid hopes for a US stimulus deal breakthrough.OIL STABILIZES, WITH FOCUS ON US LAWMAKERS FINALIZING STIMULUS PACKAGE DEALDuring yesterday's Asian trading session, Brent gained around $0.7/bbl on broad risk-on trading and hit an intraday high of $51.9/bbl in early European trading. It then tracked back toward the $51.5/bbl mark, where it stayed for the rest of the day, eventually settling at that level, up $0.42/bbl on the day. Oil investors were primarily following global markets and focusing on the finalizing of a US stimulus package deal and remaining disagreements over a trade deal between the UK and the EU. US initial jobless claims rose to 885k last week from 862k the week before and reached their highest level since early September amid states reimposing coronavirus restrictions and as lawmakers struggled to push through the new assistance package. The deteriorating data (including downbeat US retails sales published on Wednesday) did not exert much pressure on risk assets yesterday, as investors continued to focus on the US stimulus talks. Congressional negotiators were scrambling to agree the details to the $900 bln Covid-19 aid bill. Both sides said failure was not an option, with Republican Senate Majority Leader Mitch McConnell saying that talks could spill into the weekend. Oil market liquidity is drying up as the Christmas holidays approach amid expectations of a much brighter 2021 after a horrid 2020. Although we believe that 1H21 may not prove meaningfully different from the current quarter as Covid cases are still rising, some European governments are easing restrictions for the holiday period, though localized lockdowns in the US are gathering momentum, weighing on personal mobility again. Asian demand should continue to recover and hopefully absorb the OPEC+ production increases, which could be as high as 1.9 mln bpd in the first four months of 2021 under the most aggressive supply scenario.Today, important economic releases are thin on the ground, so investors are likely to focus on the German IFO expectations index, an early indicator of current conditions and business expectations for the next six months, as well as on the weekly Baker Hughes rig count. The market will also be keeping an eye out for US congressional leaders working through the final sticking points of the coronavirus relief deal. We expect oil to keep tracking the dollar and major stock market indexes and consolidate around $51/bbl for the rest of the day. The recent US stock rally that has buoyed oil prices amid vaccine and US stimulus optimism appears overstretched, with the risk of a pullback clearly growing. This could put a bid back under a battered dollar and weigh on oil prices.GOLD PRICES RISE WITH $1,900/OZ BARRIER NOW IN SIGHTYesterday, gold prices gained almost $32/oz and early in the US session peaked at near $1,885/oz as EUR/USD continued to climb and US lawmakers inched closer to a stimulus deal, which will boost money liquidity and inflation expectations and, in turn, benefit bullion. According to press reports, Congress will likely work into the weekend to resolve the details of a stimulus deal. Meanwhile, the European Parliament passed the EU's $2.2 trln stimulus proposal, and a Brexit deal now appears as close as ever, though both sides are warning that major obstacles remain. Downbeat US initial jobless data, meanwhile, did not rattle the markets but rather highlighted the need for further fiscal stimulus.This morning, gold has slid closer to $1,880/oz after Reuters reported that the US government's ban on buying Chinese securities will be expanded by another 80 companies as soon as today, although we note that the executive order bans holding the securities only from late 2021. The Wall Street Journal had reported hours earlier that government agencies were still hotly debating the contents of the list. Also providing gold price headwinds was news that the US regulator overwhelmingly endorsed the emergency use of the Moderna coronavirus vaccine. Today, investors will eye Germany's Ifo surveys and the US leading indicators. In our view, gold is still most likely to hold in the current $1,881-1,899/oz technical corridor today amid hopes for a US stimulus deal breakthrough.