Commodities Daily - January 15, 2021

> Oil trades sideways amid new US fiscal stimulus announcement and rising Covid-19 cases in China. Today, investors will eye the weekly oil rig count update from Baker Hughes, US December data, including retail sales, PPI and industrial production, and January University of Michigan consumer sentiment. We think that today Brent is unlikely to revisit its Wednesday high of $57.42/bbl in the wake of Biden's fiscal stimulus announcement as optimism this morning seems limited given concerns that the plan could struggle to win broad-based support in Congress. In our view, Brent is more likely to slide to the $55.6/bbl support level today or even consolidate within a $55.2-55.6/bbl range. Weighing on sentiment globally are also rising Covid-19 cases in China and persisting fears of protests in the US ahead of Biden's inauguration.> Gold remains range-bound despite Fed chair staying dovish and announcement of Biden's stimulus plan. Biden's plan is likely to face resistance, which is limiting the potential upside for gold, with bullion trading at around $1,850/oz as we write. Today will see the release of US December retail sales, PPI and 4Q20 earnings from the likes of JPMorgan, Citigroup and Wells Fargo. Even if these releases are upbeat, at the very best we would expect gold to surge back to the $1,861/oz resistance level, which it has failed to break on numerous occasions this week. We expect gold to stick within the $1,833-1,861/oz range.OIL TRADES SIDEWAYS AMID NEW US FISCAL STIMULUS ANNOUNCEMENT AND RISING COVID-19 CASES IN CHINAAfter trading around $56.0/bbl during the first half of the day yesterday, front-month Brent began to slide, mirroring EUR/USD, and hit an intraday low of $55.24/bbl. Midway through the European trading session, the market received the OPEC monthly oil market outlook. The OPEC Secretariat revised its 2021 global demand estimate upward by a slight 0.02 mln bpd to 95.91 mln bpd (up from 90.01 mln bpd estimated for 2020). The US led the downward revisions for 2021 demand, while China and India were revised higher due to an expected rebound in economic activity. OPEC also raised its non-OPEC supply estimate for 2021, though by a slight 0.01 mln bpd, with an upward revision for the US offsetting a downward one for Russia. US output is expected to recover at a faster rate in 2H21, as market conditions for US shale were said to have improved. Note that earlier this week, oil investors were digesting comments from IEA Director Fatih Birol that at current prices many shale producers will be able to increase production this year and next. He also said that in the short term, "we will need shale oil from the US to fill the gap" in the oil supply/demand balance. Energy Aspects, for example, expects global liquids stocks to draw by over 3 mln bpd y-o-y in 2021. We believe that the US upstream will look to stabilize production rather than boost it in 2021. In our view, a sustained WTI price of $55/bbl is needed for US shale (and thus onshore oil production) to grow.Late in the day yesterday, the Biden transition team announced an additional stimulus proposal worth $1.9-2.0 trln, with as much as half expected to go out to individuals as an additional $1,400 check, as well as various tax relief measures, which briefly supported oil prices amid the expected positive effect to driving fuel demand. Front-month Brent eventually settled at $56.42/bbl, fixing $0.36/bbl above the previous settlement. This morning, however, global sentiment weakened as markets are concerned about the risks of new taxes and debt down the line in the case of more stimulus spending now. Meanwhile, Congressional Republicans and more left-of-center Democrats are expected to release alternatives to Biden's proposal. Today, investors will eye the weekly oil rig count update from Baker Hughes, US December data, including retail sales, PPI and industrial production, and January University of Michigan consumer sentiment. We think that today Brent is unlikely to revisit its Wednesday high of $57.42/bbl in the wake of Biden's fiscal stimulus announcement as optimism this morning seems limited given concerns that the plan could struggle to win broad-based support in Congress. In our view, Brent is more likely to slide to the $55.6/bbl support level today or even consolidate within a $55.2-55.6/bbl range. Weighing on sentiment globally are also rising Covid-19 cases in China and persisting fears of protests in the US ahead of Biden's inauguration.GOLD REMAINS RANGE-BOUND DESPITE FED CHAIR STAYING DOVISH AND ANNOUNCEMENT OF BIDEN'S STIMULUS PLANGold slid almost $20/oz to $1,835/oz early yesterday before consolidating around the $1,840/oz mark after US weekly initial jobless claims spiked by much more than economists had forecast, reaching almost 1 mln. During the US trading session, gold clawed back all of the earlier losses and reached as high as $1,855/oz amid rising expectations of dovish rhetoric from Fed Chairman Jerome Powell in a scheduled speech. Powell did not disappoint, indicating that it was too early to even begin discussing rolling back QE or raising rates. He also reiterated the Fed's commitment to above-target inflation for a long period. Global markets were buoyed by anticipation of Joe Biden's speech last night, where the US president-elect unveiled a $1.9 trln stimulus package that would boost direct payments to Americans to $2,000. Biden's speech did not contain any surprises, and investors have begun to focus on the chances of the plan passing through Congress. Meanwhile, Congressional Republicans and the more left wing of the Democratic Party are expected to release alternatives to Biden's proposal. Biden's plan is likely to face resistance, which is limiting the potential upside for gold, with bullion trading around $1,850/oz as we write. Today will see the release of US December retail sales, PPI and 4Q20 earnings from the likes of JPMorgan, Citigroup and Wells Fargo. Even if these releases are upbeat, at the very best we would expect gold to surge back to the $1,861/oz resistance level a, which it has failed to break on numerous occasions this week. We expect gold to stick within the $1,833-1,861/oz range.