Commodities Daily - July 29, 2020

> Oil trades sideways, with EIA inventory report and Fed meeting results on the radar. We expect today's EIA oil and refined product inventory report to be upbeat, showing a crude oil stock draw of around 4 mln bbl amid lower imports and higher exports. We also expect the EIA numbers to contradict the API's reported weekly gasoline stock build. We believe upbeat crude oil and gasoline inventory data could prove sufficient for Brent to push all the way to the $44.1/bbl technical resistance level today, if it can first break above the nearest resistance level at $43.6/bbl. Another potential risk asset supportive factor today is the increased likelihood of Fed Chairman Jerome Powell striking a dovish tone following the conclusion of the FOMC meeting, signaling that rates will stay near zero for longer as the coronavirus continues to spread.> Gold experiences its highest volatility since March. Gold climbed by a relatively modest 0.8% yesterday to $1,958/oz and could approach the $2,000/oz mark this afternoon, in our view. Yesterday's statistics highlighted the negative impact of the coronavirus on the US economy in July. Today, the market focus will be on the post-FOMC meeting statement (21:00 Moscow time) and Jerome Powell's press conference (21:30 Moscow time).OIL TRADES SIDEWAYS, WITH EIA INVENTORY REPORT AND FED MEETING RESULTS ON THE RADARFront-month Brent peaked at $43.8/bbl yesterday morning but then began to slide. During US trading, it failed to break below $43/bbl on two occasions and eventually settled at $43.22/bbl, down $0.19/bbl on the day. The negative momentum was partially due to downbeat US consumer confidence data for July, with the index dropping to 92.6 from 98.3 in June amid the flare-up in the infection rate and the number of unemployment applications increasing for the first time since late March. Another downbeat factor is the fraught negotiations over $1 trln in proposed coronavirus fiscal stimulus measures in the US, with the leaders of the two parties accusing one another of being unwilling to compromise. The coronavirus situation in the US is still not improving, and yesterday four states reported daily record high death tolls, with more than 1,300 lives lost nationwide, the biggest one-day increase since May, according to Reuters. Today in Hong Kong, the government has warned that the city is on the brink of another outbreak and has urged people to stay indoors as much as possible.Overnight, the API reported that US crude stocks fell by a hefty 6.8 mln bbl to 531 mln bbl last week (versus the EIA's latest figure of 536.6 mln bbl). The stock draw came amid a 1.3 mln bpd drop in imports and a 0.09 mln bpd increase in refinery runs. Crude stocks at Cushing rose by another 1.1 mln bbl. However, the refined product data was slightly bearish, showing a 1.1 mln bbl build in gasoline stocks and a 0.19 mln bbl increase in distillate inventories. Investors are now looking to today's EIA inventory report due at 17:30 Moscow time. The Bloomberg consensus is calling for a 0.45 mln bbl crude stock build, a 2 mln bbl drop in gasoline inventories and a 1 mln bbl rise in distillate stocks. The upbeat API crude oil data supported Brent overnight, which gained $0.45/bbl to $43.5/bbl. We expect today's EIA oil and refined product inventory report to be upbeat, showing a crude oil stock draw of around 4 mln bbl amid lower imports and higher exports. We also expect the EIA numbers to contradict the API's reported weekly gasoline stock build, with data from GasBuddy indicating that US gasoline demand based on retail receipts increased nearly 1% in the week to July 25, following a drop of 5% the previous week. US gasoline demand began to plateau after rising from the spring into the Independence Day holiday weekend, which has strongly weighed on investor sentiment. We believe upbeat crude oil and gasoline inventory data could prove sufficient for Brent to push all the way to the $44.1/bbl technical resistance level today, if it can first break above the nearest resistance level at $43.6/bbl. Another potential risk asset supportive factor today is the increased likelihood of Fed Chairman Jerome Powell striking a dovish tone following the conclusion of the FOMC meeting, signaling that rates will stay near zero for longer as the coronavirus continues to LD EXPERIENCES ITS HIGHEST VOLATILITY SINCE MARCHYesterday, events moved rapidly for the gold market. The metal was trading at $1,981/oz in the morning but dropped sharply to $1,910/oz before recovering once more. The negative correlation between gold and real 10y US Treasury yields remains stubbornly high (the 120d MA stands at -0.89) and is causing additional volatility. Gold ended the day 0.8% higher at $1,958/oz. Its implied 3-month volatility is now almost back at the levels seen in March and April and indicates that sentiment remains a concern ahead of the FOMC meeting.The US consumer confidence index for July came in at 92.6, down from 98.3 the previous month and below the consensus forecast of 95, confirming that the coronavirus continues to wreak damage to the US economy.We anticipate further elevated volatility later today, as the statement from the FOMC meeting will be published at 21:00 Moscow time and Jerome Powell will talk to the press at 21: