Commodities Daily - December 8, 2020

> Oil prices tick lower ahead of monthly EIA oil market report. Today, oil investors will eye the EIA's monthly oil market report, which we expect 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. Eurostat may revise its 3Q20 eurozone GDP estimates today, while the December ZEW survey data for the eurozone will be in focus this afternoon. In our view, Brent could break below the $48.4/bbl support level today given the near-term demand risks due to the worsening Covid situation. It may fall into the $47.5-47.9/bbl range, though any further losses are likely to be limited with the EIA's monthly report scheduled for release later in the day.> Gold prices higher amid rising coronavirus infections in the US. Today, outgoing US President Donald Trump is scheduled to host a summit on addressing Covid-19 and the deployment of vaccines. Last-minute, top-level negotiations between the EU and UK are to continue, with an aim of reaching some breakthrough before tomorrow. Today, the OECD is to hold a conference on global productivity. We also highlight that the UK begins mass Covid-19 vaccinations today. Eurozone GDP, Germany's ZEW surveys, and US NFIB business optimism are due to be released. Chinese inflation indexes are scheduled for early tomorrow morning. In our view, today gold may extend its gains into the $1,881-1,899/oz range after it cleared key resistance at $1,847/oz.OIL PRICES TICK LOWER AHEAD OF MONTHLY EIA OIL MARKET REPORTYesterday, front-month Brent traded sideways in a $48.4-49.4/bbl range, mirroring moves in stock markets and the dollar. It eventually settled at $48.79/bbl, fixing $0.77/bbl below the previous settlement. The key supportive factor at play remains the compromise deal reached by OPEC+ last week, which all but guarantees crude stock draws in 1Q21 even under the most aggressive scenario for supply, which is a 1.5 mln bpd increase by the start of April. Even on the most aggressive assumptions, global crude stocks would draw by around 0.2 mln bpd on average in 1Q21 despite seasonally soft demand, followed by a 0.5 mln bpd average stock draw in 2Q21 and 1 mln bpd draw in 2H21. The recovery in US production following the recent price rally will not be anywhere near strong enough to offset this upbeat picture. Furthermore, OPEC+ is likely to exercise caution in easing its output restrictions, meaning a 0.5 mln bpd hike each month in 1Q21 is not a given. Last week, OPEC+ had to tread a fine line between the demand risk in the US due to rising Covid case numbers and more optimistic news elsewhere, including the surge in Asian demand and early progress in rolling out vaccinations. Between now and February, there will almost certainly be some occasional wobbles in oil prices amid Covid-related developments in the US and Europe (though after this rough patch oil prices should begin to rise more smoothly). This morning, for example, Brent slid to $48.3/bbl amid reports that the US is now seeing virus hospitalizations rise by almost 2,000 per day and is averaging around as many deaths as during Covid-19's first surge in April. Meanwhile, France appears poised to miss a goal that would bring an end to its lockdown next week. Furthermore, progress on a $908 bln pandemic relief plan in the US has slowed, with lawmakers set to postpone a Friday night deadline for passing a bill. On the positive side, Japan (one of the world's largest crude consumers) announced a stimulus package of more than $700 bln, while China announced measures to contain its record debt burden.Today, oil investors will eye the EIA's monthly oil market report, which we expect 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. Note that last month the EIA lowered its 2021 global demand forecast by 0.29 mln bpd to 98.8 mln bpd. Eurostat may revise its 3Q20 eurozone GDP estimates today, while the December ZEW survey data for the eurozone will be in focus this afternoon. In our view, Brent could break below the $48.4/bbl support level today given the near-term demand risks due to the worsening Covid situation. It may fall into a range of $47.5-47.9/bbl, though any further losses are likely to be limited with the EIA's monthly report scheduled for release later in the day.GOLD PRICES HIGHER AMID RISING CORONAVIRUS INFECTIONS IN THE USAfter trading near $1,840/oz at the start of the day yesterday, gold prices slid to $1,825/oz as EUR/USD dropped along with major stock market indexes. The greenback found additional tailwinds from reports that the trade negotiations between the EU and UK were on the verge of collapsing, which sent EUR/USD to 1.208. However, it was later reported that leaders from the UK and EU had spoken over the phone and agreed to meet in person to sort things out in the coming days. This improved the global backdrop and gold soon began to pare back earlier losses along with EUR/USD. Ahead of the US trading session, bullion began to rally and in the early Wall Street hours surged toward $1,865/bbl. This came as the US is now seeing coronavirus hospitalizations rise by almost 2,000 a day, while the death rate is now comparable to what was seen in April. France, meanwhile, is poised to miss a goal to end its lockdown next week. It can be concluded that gold's safe-haven premium has yet again started to build up after declining last month (resulting in a gold price slump) on upbeat vaccine reports.However, further price upside was limited by news that members of Congress would extend their unofficial Friday night deadline to reach a deal on an interim $908 bln pandemic relief stimulus package. On the positive side, Japan announced a stimulus package of more than $700 bln, while China is opting to contain its record debt burden. Also, the US announced sanctions against 14 members of the Chinese National People's Congress yesterday. Today, outgoing US President Donald Trump is scheduled to host a summit on addressing Covid-19 and the deployment of vaccines. Last-minute, top-level negotiations between the EU and UK are to continue, with an aim of reaching some breakthrough before tomorrow. Today, the OECD is to hold a conference on global productivity. We also highlight that the UK begins mass Covid-19 vaccinations today. Eurozone GDP, Germany's ZEW surveys, and US NFIB business optimism are due to be released. Chinese inflation indexes are scheduled for early tomorrow morning. In our view, today gold may extend its gains into the $1,881-1,899/oz range after it cleared key resistance at $1,847/oz.