Commodities Daily - December 24, 2020

> Oil prices supported by upbeat EIA report, post-Brexit UK-EU trade deal, Nigerian supply disruption. Today, Brent and WTI trading will cease around 22:00 Moscow time as markets close for the Christmas holiday. As we write, Brent is trying to overcome the $51.6/bbl resistance level, with a break above likely leading to gains into a $52.5-53.1/bbl range. However, we think it will remain within its current $50.6-51.6/bbl range today (an unexpected break below could lead to losses to $49.4/bbl) as we see few sources of upside beyond those that materialized yesterday.> Gold ticks higher on weaker dollar as UK-EU trade deal shapes up. Today will be subdued with the Christmas holiday at hand. In our view, further strengthening of the euro and the pound could be forthcoming if a UK-EU trade agreement is officially announced. On the back of this, gold may test resistance at $1,888/oz today, with a break above opening the door for gains to $1,904/oz.OIL PRICES SUPPORTED BY UPBEAT EIA REPORT, POST-BREXIT UK-EU TRADE DEAL, NIGERIAN SUPPLY DISRUPTIONAfter sliding to an intraday low of $49.2/bbl (the same low as on Monday) at the start of the day yesterday, front-month Brent began to generate positive momentum ahead of the EIA weekly inventory update, rising to $50.7/bbl. Investors were shrugging off Donald Trump's threat not to sign the $900 bln fiscal stimulus bill, while also in the backdrop was a supply disruption in Nigeria, which could affect as much as 0.18 mln bpd (Exxon Mobil issued a force majeure on the Qua Iboe crude oil export terminal after a fire, with sources telling Reuters that production is expected to resume in early January). Oil prices yesterday drew support from the fact that trade and transport links between the UK and the continent have reopened and trade negotiations have continued.The weekly EIA inventory report indicated a 0.56 mln bbl draw in US crude stocks to 499.5 mln bbl last week, amid a 0.47 mln bpd increase in exports to 3.1 mln bpd - the highest level since November, as China and India are pulling barrels as fuel demand continues to recover in Asia. The 0.17 mln bpd decrease in refinery inputs to 14.0 mln bpd and a 0.14 mln bpd increase in imports to 5.56 mln bpd were insufficient to offset the overall draw. US crude oil production, meanwhile, was flat at 11.0 mln bpd. The EIA refined product data was also on the bullish side: gasoline stocks fell 1.13 mln bbl to 237.8 mln bbl and distillate stocks drew 2.33 mln bbl to 148.9 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 10.667 mln bbl amid a 2.3 mln bbl draw in propane stocks and a 4.8 mln bbl draw in the "other oils" category. We highlight that gasoline stockpiles fell for the first time since mid-November; however, this does not seem demand driven (with demand still at its lowest levels since the mid-1990s) and instead is the result of low oil processing at refineries. In the case of distillates, the year-end pickup in trucking and freight has helped to draw inventories. Following the EIA report, Brent surged $0.9/bbl to an intraday high of $51.59/bbl. The UK and the EU reaching agreement on the outline of a post-Brexit trade agreement also supported prices. Meanwhile, the latest Baker Hughes report showed only one active US oil rig addition, with the total now at 264, and did not unsettle the market. Front-month Brent eventually settled at $51.20/bbl, fixing $1.12/bbl above the previous settlement.Today, Brent and WTI trading will cease around 22:00 Moscow time as markets close for the Christmas holiday. As we write, Brent is trying to overcome the $51.6/bbl resistance level, with a break above likely leading to gains into a $52.5-53.1/bbl range. However, we think it will remain within its current $50.6-51.6/bbl range today (an unexpected break below could lead to losses to $49.4/bbl) as we see few sources of upside beyond those that materialized yesterday.GOLD TICKS HIGHER ON WEAKER DOLLAR AS UK-EU TRADE DEAL SHAPES UPDuring the first half of the day yesterday, gold largely traded sideways within a $1,860-1,870/oz range. With the US session, however, it began to generate positive momentum, rising from $1,860/oz toward the $1,880/oz mark, which it has reached this morning. At the start of the day yesterday, gold managed to stay above the technical support level near $1,860/oz, which points to the fact that investors have shrugged off Donald Trump's threat not to sign the US fiscal stimulus bill. House Speaker Nancy Pelosi seized on Trump's call for larger checks for individuals and said the House of Representatives would try to push them through during a pro forma session today. Supporting gold prices later in the day was the news that the UK and the EU had reached agreement on a trade deal, which is to be announced today. As a result, the pound and the euro have appreciated sharply against the dollar, meaning tailwinds for gold.Today will be subdued with the Christmas holiday at hand. In our view, further strengthening of the euro and the pound could be forthcoming if a UK-EU trade agreement is officially announced. On the back of this, gold may test resistance at $1,888/oz today, with a break above opening the door for gains to $1,904/oz. However, the boost from the announcement of a deal would likely be short-lived, as after this important event investors would focus on the discouraging virus data and the potential deterioration in the global economic situation in coming weeks or months. Thus, as our FX team notes, after what could be gains for EUR/USD toward 1.225 today, the euro may retrace to 1.20 in late December-early January - that would in turn drive gold prices below the $1,862/oz support level, exposing it to the next support at $1,845/oz.