Commodities Daily - February 28, 2019

> Oil receives strong fundamental support, but negative trend in stock markets tipping the scales the other way. Downbeat factory activity data out of China (for February) and Japan (for January) this morning is heavily weighing on both stocks and oil. This provides more evidence of a global economic slowdown and comes on the heels of concerns about the likelihood of a trade deal following Lighthizer's comments yesterday. Today, investors will be eyeing the monthly EIA-914 oil and gas production report, which will reveal actual US crude oil production growth in December. We expect stock market headwinds and increasing fear of an economic slowdown will weigh on Brent today, which we think will move lower toward $65.5/bbl later in the day. > Gold again trades sideways. Gold stayed above $1,320/oz in the morning against the backdrop of a strengthening dollar. Today we will see US GDP data for 4Q18. Further dollar strength could see gold trading in the $1,310-1,320/oz range.> Base metals open with a slight correction. We attribute this to a weak Chinese PMI reading this morning, together with US Trade Representative Lighthizer's comments yesterday suggesting that a US-China trade deal could be further away than thought. The rally in base metals so far this year has been based on the assumption that the countries would be able to at least stop expanding and raising tariffs by March, so if negotiations begin to break down, we think a correction across the entire market would follow.