Commodities Daily - July 10, 2019

> Oil ticks higher with focus on Powell speech, EIA inventory data. We think that today's EIA data will show a crude oil draw of around 5-6 mln bbl (more than the consensus but below the API estimate), which along with the decline in gasoline stocks is likely to be taken positively by the market. We see $0.5/bbl upside for Brent following the release. Note that at the same time markets will be drawn to Fed Chairman Powell's speech to the House of Representatives. The focus will be on whether he will hint at a 25 bp rate cut at the late-July FOMC meeting. We are more inclined to expect both events to be positive for oil and think that Brent will secure above $66/bbl later today.> Gold prices remain stable but increased volatility due to Powell's speech likely. We think that Powell will hint at a 25 bp cut today, backing this view by citing the worrying lack of inflation globally and global economic uncertainty. However, because such rhetoric is what markets seem to be expecting, we think the upside for gold is limited to moving just above $1,400/oz, whereas the downside risks are a lot larger. If Powell refrains from hinting at a cut, it could mark the beginning of a prolonged correction (with gold slipping below $1,380/oz) that would become abrupt if the Fed does indeed hold off on cutting on July 31.