Commodities Daily - February 11, 2020

> Oil still under pressure as Russia weighs cuts; EIA monthly report eyed. Today, oil investors will eye the monthly EIA oil market report, where a downgrade to the agency's Chinese oil demand growth estimate for 2020 is all but certain and could weigh on prices. The API's weekly report on US oil inventories will be released overnight and could provide additional headwinds, in our view. We think Brent is likely to retest support at $53/bbl later today.> Gold prices stable; today's focus on Powell's speech, possible comments on epidemic. Yesterday was a quiet day for gold. Prices edged up to $1,575/oz with the US open, but by this morning they have slid to $1,570/oz. Investors will be focused today on comments from ECB head Christine Lagarde and Fed head Jerome Powell. Any comments by Powell about how the epidemic could impact the US economy will be important. If his rhetoric is again neutral, we think gold prices could drop to $1,560/oz.> Base metal markets remain highly volatile. Nickel (-2.2%) and zinc (-2.8%) came under pressure yesterday amid further downbeat headlines about the virus. However, sentiment has improved today following reports that new recorded infections in the Hubei province, ground zero of the epidemic, totaled just 2,097, the smallest number of new cases since February 1. Yesterday, Xi Jinping announced that it was necessary to make every effort to resume already begun construction and undertake new projects. As of this writing, nickel is up 2.5%, while zinc and copper have climbed 1%.OIL STILL UNDER PRESSURE AS RUSSIA WEIGHS CUTS; EIA MONTHLY REPORT EYEDFront-month Brent was trading near the $54.5/bbl mark during yesterday's Asian session before shedding around $1.5/bbl and hitting a one-year low of $53/bbl during US trading. It eventually settled at $53.27/bbl, $1.2/bbl below the previous settlement. Following a lengthy correction in late January during which Brent slid almost $12/bbl, the benchmark has consolidated within the $54-56/bbl range during the first week of February amid expectations of a resolute OPEC+ decision to further cut production to offset the coronavirus-related demand losses. However, OPEC+ keeps struggling to reach a consensus on how to respond to the outbreak, which sent Brent below the $54-56/bbl corridor yesterday. Markets continue to wait for Russia's announcement (expected sometime this week) on whether it will go along with the additional 0.6 mln bpd cut in 2Q20 that was recommended last week by the Joint Technical Committee. Until such an announcement is made, oil markets will remain exposed to further price corrections as the death toll from the virus keeps climbing (it has already surpassed that of SARS in 2002-03) and as investors lose faith in the ability of OPEC+ to swiftly respond to oil price shocks. The current consensus seems to be that the outbreak has lowered Chinese oil demand by more than 3 mln bpd, while Bloomberg has reported that Chinese roads remain empty despite the end of the prolonged public holiday, as many companies have asked their staff to work from home and people continue to refrain from all forms of transport when possible. It is also important to note that the UN-brokered Libya peace talks ended without a formal ceasefire yesterday.Overnight, Brent surprisingly clawed its way back from a one-year low, and this morning it is trading near $54/bbl. There was no clear catalyst other than the rally in global stock markets. One recent positive was a comment from Kazakhstan's energy minister that the OPEC+ meeting could actually be moved forward from early March to late February. Investors are also closely monitoring major physical market trading houses, who are now hiring supertankers for storage purposes, in order to capitalize on the current contango in the futures market. Today, oil investors will eye the monthly EIA report, where a downgrade to the agency's Chinese oil demand growth estimate for 2020 is all but certain and could weigh on prices. The API's weekly report on US oil inventories will be released overnight and could provide additional headwinds, in our view. We think Brent is likely to retest support at $53/bbl later LD PRICES STABLE; TODAY'S FOCUS ON POWELL'S SPEECH, POSSIBLE COMMENTS ON EPIDEMICYesterday was a quiet day for gold. Prices edged up to $1,575/oz with the US open, but by this morning they have slid to $1,570/oz. Investors will be focused today on comments from ECB head Christine Lagarde (starting at 17:00 Moscow time) and Fed head Jerome Powell (18:00). Since the coronavirus outbreak, the implied probability of a Fed rate cut before end-September has increased to 99% and that of two cuts before year-end has risen to almost 40%. Thus, any comments by Powell about how the epidemic could impact the US economy will be important. If his rhetoric is again neutral, gold could drop to $1,560/oz. In addition, UK GDP, industrial production and trade numbers are due. The US will see NFIB small business SE METAL MARKETS REMAIN HIGHLY VOLATILEYesterday, pessimism held sway in base metal markets and only intensified at the US open. Prices came under pressure, the biggest losses coming in nickel (-2.2%) and zinc (-2.8%). Meanwhile, today it was reported that new recorded infections in the Hubei province, ground zero of the epidemic, totaled just 2,097, the smallest number of new cases since February 1. This has helped prices recover so far today. Meanwhile, the PBoC continues to provide short-term liquidity via 7d repo operations ($14 bln was injected today). The uncertainty surrounding both deliveries of raw materials to China and end demand for Chinese manufactured goods remains high. Bloomberg reports that BHP is in talks with Chinese customers about delaying deliveries in order to avoid having to declare force majeure. Prior to that there were reports that Chinese customers were in talks with Chilean copper concentrate producers about suspending deliveries. Investors will be waiting to see what measures the Chinese government takes to support domestic metals demand. Yesterday, Xi Jinping announced that it was necessary to make every effort to resume already begun construction and undertake new