Commodities Daily - December 7, 2020

> Oil prices stabilize as Saudi Arabia raises oil prices for Asia, while Chinese imports increase in November. This morning, investors have been digesting rather upbeat Chinese November trade data, which showed crude oil imports increasing to 11.04 mln bpd from 10.04 mln bpd in October. Over the weekend, Saudi Arabia increased its oil prices for Asian customers in January by more than expected, a sign it is confident that demand is strong enough to absorb the small boost to OPEC+ supply at the start of next year. There are few noteworthy macro releases today. We think that Brent may test the $48.7/bbl support level today amid somewhat weaker risk appetite, though we think it is unlikely to fall below this mark and consolidate in the $47.9-48.7/bbl range.> Gold stuck around $1,840/oz mark with spotlight on US and EU stimulus. There is little of note on today's agenda apart from negotiations over the EUR1.8 trln EU budget, which must be approved today. Despite opposition from Poland and Hungary, the budget is widely expected to pass. There is a risk that the dollar may extend its gains from late Friday, which we believe would keep bullion within the current $1,830-1,845/oz range.OIL PRICES STABILIZE AS SAUDI ARABIA RAISES OIL PRICES FOR ASIA, WHILE CHINESE IMPORTS INCREASE IN NOVEMBERDuring the first half of the day on Friday, Brent rallied toward $50/bbl, still buoyed by the news that OPEC+ had agreed to hike output by only 0.5 mln bpd in January and then hold monthly meetings to decide on subsequent moves. However, the benchmark came up just short of the mark, peaking at $49.92/bbl. Reports of progress in the negotiations among US lawmakers over a new fiscal stimulus package also supported oil prices, as the stimulus could provide a boost to demand for motor fuels. It was reported that some Senate Republicans were willing to support the Democrats' proposed $900 bln interim stimulus package. However, later in the day Brent eased back to $49/bbl, as the November US jobs report showed that nonfarm payrolls were up only 245k in November after rising by 610k in October. This was the smallest gain since the jobs recovery began in May and marked the fifth straight slowdown in payroll growth. Also providing headwinds late Friday was a five-unit increase in the Baker Hughes US active oil rig count, to 246. Brent settled at $49.25/bbl, fixing $0.54/bbl above the previous settlement.This morning, investors have been digesting rather upbeat Chinese November trade data, which showed crude oil imports increasing to 11.04 mln bpd from 10.04 mln bpd in October. Worth noting here is that commodity research firm Kpler recently estimated that the amount of crude oil held in floating storage by China had dropped to around 30 mln bbl in late November, down from a peak of 96 mln bbl in early September. Over the weekend, Saudi Arabia increased its oil prices for Asian customers in January by more than expected, a sign it is confident that demand is strong enough to absorb the small boost to OPEC+ supply at the start of next year. We highlight that the increase was the biggest in five months, and that the Saudis had previously lowered prices for September, October and December. Saudi Aramco also increased its pricing for light crude oil grades headed to the Mediterranean region, kept them unchanged for Northwest Europe and lowered prices for all grades destined for the US. There are very few noteworthy macro releases today. We think that Brent may test the $48.7/bbl support level today amid somewhat weaker risk appetite, though we think it is unlikely to fall below this mark and consolidate in the $47.9-48.7/bbl range.We expect the EIA's monthly oil market report due later this week to be upbeat in light of the latest vaccine developments and the recent decision of OPEC+ not to boost output by 1.9 mln bpd in January. Iran will also be in focus after President Hassan Rouhani's statement that Tehran will "prepare resources and oil-industry equipment for production and export of oil within the next three months." Iran expects the US to ease some of the sanctions on its oil under the incoming Biden administration (the president-elect has signaled that he would like to reestablish the nuclear agreement with Iran that the US pulled out of in 2018), which we note could potentially bring around 2 mln bpd of supply back on the market.GOLD STUCK AROUND $1,840/OZ MARK WITH SPOTLIGHT ON US AND EU STIMULUSOn Friday, gold consolidated around the $1,840/oz mark, a level it reached around midday on Thursday after rallying all the way from $1,770/oz. It remains around the $1,840/oz level as we write. A disappointing November US jobs report failed to boost gold on Friday, though it supports the narrative that more stimulus is needed. Nonfarm payrolls rose just 245k, missing the consensus by around 200k and marking a considerable slowdown from October's 400k increase. The data suggests the US labor market recovery has lost steam amid the resurgence of Covid-19. Nonetheless, investors remain somewhat optimistic, as the chances of a new US fiscal stimulus package seem to be growing by the day, which is causing US inflation expectations to pick up. Gold is a traditional hedge against this. This morning, amid mixed Chinese trade data, media reports suggested that eight Chinese companies could be facing imminent US sanctions and that Washington could also sanction more Chinese officials in the coming days due to developments in Hong Kong.There is little of note on today's agenda apart from negotiations over the EUR1.8 trln EU budget, which must be approved today. Despite opposition from Poland and Hungary, the budget is widely expected to pass. There is a risk that the dollar may extend its gains from late Friday, which we believe would keep bullion within the current $1,830-1,845/oz range. A break above the $1,847/oz resistance level would likely pave the way to $1,867/oz, though from a technical perspective we consider the downside risks to be more potent, as they are pointing to a drop into the $1,796-1,816/oz range. The Financial Times is reporting that a bipartisan group from the US Congress will announce a revised $900 bln stimulus proposal this week.