Commodities Daily - July 17, 2020

> Oil moves lower as latest surge in US infection rate weighs on sentiment; oil demand risks on the rise. Brent is in the $43.0-43.5/bbl range as we write, with investors eying the release today of the eurozone CPI, US building permits and housing starts, University of Michigan consumer sentiment and the Baker Hughes rig count. During US trading hours, we could see further headlines related to a recent Washington Post report claiming that internal advisors to the White House are calling for stricter anti-coronavirus measures in roughly a third of US states. We expect downbeat Covid-19 news to dominate today as well. This could derail Brent's latest attempt to break above resistance at $43.8/bbl and consolidate within the $44.1-44.7/bbl technical range. We think it is more likely to break below $43.1/bbl support today and consolidate within the $42.4-42.7/bbl technical range.> Gold prices decline yesterday, down 0.7% to $1,797/oz. Comments by ECB President Christine Lagarde and surging infection rates in the US helped the dollar firm yesterday, which pressured precious metal prices. Today, however, bullion has firmed back to the familiar $1,800/oz level. The key events on today's calendar are the University of Michigan consumer sentiment index and US new housing starts.OIL MOVES LOWER AS LATEST SURGE IN US INFECTION RATE WEIGHS ON SENTIMENT; OIL DEMAND RISKS ON THE RISEFront-month Brent was trading near $43.5/bbl for most of yesterday and with the opening in New York began to mirror EUR/USD, sliding to an intraday low of $43.1/bbl. It eventually settled at $43.37/bbl, down $0.42/bbl on the day. Yesterday's upbeat US retail sales data for June was overshadowed by remarks from three regional Fed presidents indicating that the US economic recovery has paused, which was confirmed by plateauing US jobless claims data. The New York Times yesterday reported 75,000 new Covid-19 cases in the US, a new daily record. Fresh daily spikes in infection rates were reported in Spain and Australia, while cases continued to soar in India and Brazil stepped up its lockdown measures.This morning, Brent remained at $43.0-43.5/bbl, with investors eying the release today of the eurozone CPI, US building permits and housing starts and University of Michigan consumer sentiment, as well as the Baker Hughes rig counts. During US trading hours, we could see further headlines related to a recent Washington Post report that internal advisors to the White House are calling for stricter anti-coronavirus measures in roughly a third of US states. Also today, EU leaders will again debate the details of their economic stimulus package, with the volume of grants versus loans remaining a critical sticking point. Yesterday, mixed economic data did not impact the oil market much, as investors were concentrating on rise in the global infection rate, particularly in the US. We expect downbeat Covid-19 news flow to dominate today as well. This could derail Brent's latest attempt to break above the $43.8/bbl resistance mark and consolidate within the $44.1-44.7/bbl technical range. We think Brent is more likely to break below $43.1/bbl support today and consolidate within the $42.4-42.7/bbl technical range.For the first time since the global lockdowns began to be lifted, we think the latest economic data and the rise in the infection rate have started to strongly suggest that a V-shaped recovery in global oil demand (as forecast by the three main global forecasting agencies) is under threat. In addition, Bloomberg recently reported that congestion on US city streets is still well below pre-lockdown levels, although the picture in Europe is a bit brighter, with congestion climbing back to levels seen before restrictions were imposed. Should a resurgence in Covid-19, particularly in North and Latin America, result in new large-scale lockdowns, this would be a very serious concern for oil investors, who would begin to worry that the rebound in oil demand will falter. The net result would be a re-pricing of a V-shaped market recovery, possibly pressuring Brent toward $40/bbl. All in all, despite high-frequency stockpile data from the US providing the first convincing indication that the global oil market is rebalancing, we think that refiners as well as OPEC+ are still walking a tightrope in trying to raise LD PRICES DECLINE YESTERDAY, DOWN 0.7% TO $1,797/OZYesterday we noted that US retail sales and initial jobless claims would be important toward determining the direction of gold prices. However, gold practically did not react to the data. Retail sales for June showed a recovery, adding 7.5% m-o-m (above the consensus of 5%). Initial jobless claims came in at 1.30 mln (last week they were 1.31 mln), which was above the consensus of 1.25 mln. On the whole the data reflect the earlier recovery trends that have largely already been priced in over the last three weeks. What turned out to be key for markets yesterday were headlines about the surging infection rates in the southern and western parts of the US. In fact, over the previous day the US saw a record 75k infections. This will likely end up being reflected in the macro data, but with a lag. Yesterday, the ECB kept interest rates unchanged at 0%. ECB President Christine Lagarde noted that economic activity in the eurozone is recovering but remains below pre-pandemic levels. The ECB also kept its emergency pandemic bond-buying program (PEPP) unchanged at EUR1.35 bln. This pressured the euro and buoyed the dollar, which ended up having the effect of pressuring prices on precious metals. Gold prices came under pressure later in the day yesterday and even temporarily dipped under the $1,795/oz mark. It closed at $1,797/oz (-0.7%). Quotes are recovering this morning and have returned to the now familiar $1,800/oz level. The key events on today's calendar are the University of Michigan consumer sentiment index and US new housing