Commodities Daily - January 16, 2020

> Oil recovers from downbeat EIA data on US-China trade deal optimism. This morning, Brent is hovering below $64.5/bbl mark with IEA monthly report being the main highlight of the day, which we expect to be downbeat resulting in Brent retesting $63.95/bbl technical support. German CPI and US releases including retail sales, the Philadelphia Fed index and jobless claims are on today's macro calendar.> Gold unrattled by signing of US-China trade deal as investors prefer to stick to safe havens. China's commitments seem unrealistic, which is keeping investors skeptical over its ability to deliver on such a pledge. This has given rise to fear of potential tariff-related penalties for non-compliance to the deal. In our view, gold's resilience to the trade deal signing implies that investors have already started to look past the initial deal (which ultimately provided no surprises). In our view, this effectively opens the way for gold to reach technical resistance at around $1,565/oz in the medium term.OIL RECOVERS FROM DOWNBEAT EIA DATA ON US-CHINA TRADE DEAL OPTIMISMIn the first half of the day yesterday, front-month Brent fluctuated in a $64.1-64.6/bbl range, settling into the upper end of this range ahead of the release of the monthly OPEC report (15:40 Moscow time). As it turned out, the main takeaway from the OPEC report was that the OPEC Secretariat - in line with the EIA, which released its monthly report on Tuesday - lowered (by 0.12 mln bpd) its "call on OPEC crude" estimate (the level of OPEC production required to keep the oil market in balance) for this year. This weighed on oil prices. The adjustment owed mainly to a 0.14 mln bpd revision to Latin American production driven by new production streams from Guyana (its output is now projected to grow 0.37 mln bpd y-o-y). OPEC now sees demand for its crude averaging 29.47 mln bpd in 2020, which is higher than the EIA's 28.95 mln bpd estimate. The crucial difference between the two reports is that the Secretariat sees OPEC's December production level of 28.91 mln bpd, if maintained, as sufficient to prevent market oversupply in 2020, while the EIA's 29.29 mln bpd estimate implies oversupply this year if maintained. This is not surprising, as OPEC's outlook has been more optimistic than the EIA's and IEA's for several months. The monthly report from the IEA (which has been the most bearish of the three) is due today at 12:00 Moscow time.Brent was trading close to $64.2/bbl ahead of the EIA inventory report, which ended up showing a 2.55 mln bbl decrease in US crude stocks to 428.5 mln bbl last week, which exceeded the Bloomberg consensus of a 1.1 mln bbl draw and defied the API's reported 1.1 mln bbl increase. The drawdown came amid a 0.17 mln bpd decrease in imports to 6.55 mln bpd, a 0.4 mln bpd increase in exports to 3.48 mln bpd and a 0.07 mln bpd increase in refinery inputs to 16.97 mln bpd. US crude production's 0.1 mln bpd increase to a record high of 13 mln bpd was insufficient to prevent a draw. The refined product data, on the other hand, was rather bearish, with total petroleum stocks (including oil but excluding strategic petroleum reserves) up by a strong 14.4 mln bbl (after swelling by 14.7 mln bbl in the prior week). Gasoline stocks grew a strong 6.67 mln bbl to 258.3 mln bbl, while distillate stocks were up a massive 8.17 mln bbl to 147.2 mln bbl. Following the report, Brent fell to an intraday low of $63.55/bbl, but it then managed to pare back some of those losses on optimism over the signing of the phase one US-China trade deal. The centerpiece of the deal is a pledge by China to purchase at least an additional $200 bln worth of US goods and services over 2020-21 (relative to the baseline of $186 bln in total purchases from 2017). This includes $52.4 bln in additional purchases of US energy over two years, which, according to Bloomberg's calculations, implies that China will need to buy 21.9 mln bbl of US crude per month on average in 2020 and 36.2 mln bbl in 2021. Both of these figures are way above the record high of 14.7 mln bbl from January 2018, which has left many investors skeptical over China's ability to take in these volumes and thus fearful over potential penalties for non-compliance. Brent eventually settled at $64.0/bbl, fixing $0.49/bbl below the previous settlement. This morning, Brent is hovering below the $64.5/bbl mark. The IEA monthly report is the main item on today's agenda for oil investors, and we expect it to be downbeat, which could result in Brent retesting support at $63.95/bbl. German CPI and US releases including retail sales, the Philadelphia Fed index and jobless claims are highlights on today's macro LD UNRATTLED BY SIGNING OF US-CHINA TRADE DEAL AS INVESTORS PREFER TO STICK TO SAFE HAVENSAfter sliding to $1,535/oz at the start of this week, gold has embarked on a gradual rally, which was sustained yesterday (midday it moved from the $1,545-1,550/oz range up to $1,550-1,555/oz). One of the macro highlights yesterday was the US PPI print, which showed 0.1% growth (versus an expected increase of 0.2%). This comes after a flat reading in November. Over the last 12 months, the PPI increased 1.3% as of December (in line with the consensus), up from 1.1% as of November. In December, a rise in the cost of goods was offset by weakness in services. Yesterday's PPI print followed Tuesday's CPI reading that showed only a small increase in December. In any case, both showed that inflation is well contained. This underpins market expectations that the Fed will not hike rates in the foreseeable future (this is supportive for gold).The major global market highlight was of course the official signing of the phase one trade deal. The centerpiece of the deal is a pledge by China to purchase at least an additional $200 bln worth of US goods and services over two years (this is above the baseline of $186 bln in purchases in 2017). Despite the massive obligations this places on China, the 25% tariffs on $250 bln of Chinese industrial goods will remain in place. This has elicited a certain amount of caution among investors, who have so far shown a proclivity to stay in safe-haven assets such as gold. According to US Treasury Secretary Steven Mnuchin, these tariffs could be rolled back as part of a phase two deal, which would include thornier issues such as technology and cybersecurity. Moreover, as we noted in the oil section, China's commitments seems unrealistic, which is keeping investors skeptical over its ability to deliver on such a pledge. This has given rise to fear of potential tariff-related penalties for non-compliance to the deal. Today, investors will eye German CPI and US releases such as retail sales, the Philadelphia Fed index and jobless claims. In our view, gold's resilience to the trade deal signing implies that investors have already started to look past the initial deal (which ultimately provided no surprises). In our view, this effectively opens the way for gold to reach technical resistance at around $1,565/oz in the medium