Commodities Daily - December 23, 2020

> Oil prices slide ahead of EIA US weekly inventory update. Besides the EIA weekly inventory update, today's agenda also includes Baker Hughes rig count data, US November durable goods orders, US personal income and spending, and weekly initial jobless claims. In our view, bearish refined product data from the EIA is likely to outweigh what we expect to be a draw in crude stocks, with worries about whether Trump will sign the recently passed US stimulus providing more headwinds. Amid the news about the new strain of the virus, Brent is now close to the $49.4/bbl support level, which we think could be broken through today, with the next support at $47.8/bbl.> Gold slides on dollar strengthening; US stimulus delay in focus. Today sees a heavy flow of US data. Most important will be weekly initial jobless claims, which might come in higher than expected given the current virus situation. All in all, we see a high risk that gold will break through support at $1,862/oz today, which would open the path toward the next support at $1,845/oz. Meanwhile, resistance is at $1,875/oz, with a break above that likely leading to gains to $1,888/oz, although we see this as very unlikely.OIL PRICES SLIDE AHEAD OF EIA US WEEKLY INVENTORY UPDATEAfter hovering above $50.5/bbl at the start of the day yesterday, front-month Brent began to slide toward $49.5/bbl in late Asian trading hours. Later on, it managed to consolidate back in the $50.0-50.5/bbl range. It eventually settled at $50.08/bbl, fixing $0.83/bbl below the previous settlement. Currently, oil trading is very thin ahead of the Christmas holidays, while the new coronavirus strain continues to generate negative demand-side headlines for oil. According to officials, it could already be in the US, Germany, France and Switzerland, which increases the risk of more stay-at-home measures, which would sap energy demand. The UK is considering putting more people under a strict lockdown to halt the spread of the new strain.Overnight, the API reported a 2.7 mln bbl rise in US crude stocks for last week to 497.7 mln bbl. The build came amid a 0.092 mln bpd increase in imports and despite a 0.076 mln bpd increase in refinery runs. Crude oil stocks at Cushing rose 0.341 mln bbl. The refined product data was mixed, showing a 0.224 mln bbl draw in gasoline stocks and a 1.0 mln bbl build in distillate stocks. The EIA inventory report is due today at 18:30 Moscow time. The Bloomberg consensus is for a 3 mln bbl crude stock draw, a 0.8 mln bbl increase in gasoline stocks and a 1.5 mln bbl decrease in distillate stocks. We expect a draw in crude stocks of around 2.0 mln bbl, with the picture for refined products being overall worse than in the API data. Stricter measures against the virus in several parts of the US have been weighing on consumption, even as vaccinations have started. According to GasBuddy projections, the number of Americans making road trips this Christmas could slump by as much as 25%.Besides the EIA weekly inventory update, today's agenda also includes Baker Hughes rig count data, US November durable goods orders, US personal income and spending, and weekly initial jobless claims. Note that technical resistance for Brent is at $50.6/bbl, with a break above that likely to lead to gains to $51.6/bbl - that said, in the current circumstances we see this as very unlikely today. In our view, bearish refined product data from the EIA is likely to outweigh what we expect to be a draw in crude stocks, with worries about whether Trump will sign the recently passed US stimulus providing more headwinds (he is demanding an increase in checks to be sent to most Americans to $2,000 from $600). Amid the news about the new strain of the virus, Brent is now close to the $49.4/bbl support level, which we think could be broken through today, with the next support at $47.8/bbl.GOLD SLIDES ON DOLLAR STRENGTHENING; US STIMULUS DELAY IN FOCUSYesterday, the dollar advanced amid fears of a tightening of lockdowns in Europe as the mutated strain of the coronavirus continues to spread, weighing on gold prices, which fell from $1,880/oz to $1,860/oz. As we noted in the oil section above, the new coronavirus strain, according to officials, could already be in the US, Germany, France and Switzerland, which increases the risk of more stay-at-home measures, which would sap energy demand. The UK is considering putting more people under a strict lockdown to halt the spread of the new strain. Also, President Trump yesterday stated that he would not sign the fiscal stimulus bill passed by Congress because he sees it as insufficient and believes it should be increased. Specifically, he said that the bill included "wasteful and unnecessary" items and demanded to increase the stimulus checks due to go out to most Americans to $2,000 from $600. There had been no earlier warning that the president would oppose the bill, so his comments came as a surprise. Nevertheless, it still seems likely the current bill will be signed. If not, then there will be more downside for gold, as the upbeat news on the US fiscal stimulus earlier this week had supported prices all the way from $1,825/oz last week toward $1,900/oz. Today sees a heavy flow of US data. Most important will be weekly initial jobless claims, which might come in higher than expected given the current virus situation. All in all, we see a high risk that gold will break through support at $1,862/oz today, which would open the path toward the next support at $1,845/oz. Meanwhile, resistance is at $1,875/oz, with a break above that likely leading to gains to $1,888/oz, although we see this as very unlikely.