Commodities Daily - July 6, 2020

> Oil ticking higher, with ISM nonmanufacturing data and US infection rate in focus. All attention today will be on the US ISM nonmanufacturing PMI for June, due at 17:00 Moscow time. The service sector bore the brunt of the economic disruption during the Covid-19 shock, but the worst is likely behind us, and this should be reflected in a further rise in the index in June to near 50 from 45.4 in May. Tomorrow sees the EIA's monthly report, while the IEA's monthly report is due on Friday. We think the latest surge in the global infection rate could force the agencies to lower their global oil demand estimates for this year. Coupled with further likely builds in US refined product stocks, this could create headwinds to pressure Brent within the $41.8-42.4/bbl technical range later this week. For today, we think Brent will continue to hover below technical resistance at $43.8/bbl.> Gold prices have renewed gains following quiet day on Friday. Gold is approaching $1,778/oz this morning and it is entirely possible that prices will continue their rise when the US session gets underway. We see technical resistance for gold at $1,789/oz. Today, investors will be keeping an eye out for on China's gold and currency reserves and the ISM US nonmanufacturing index (17:00 Moscow time).OIL TICKING HIGHER, WITH ISM NONMANUFACTURING DATA AND US INFECTION RATE IN FOCUSOn Friday, front-month Brent was trading within a tight $42.5-43.0/bbl range and eventually settled at $42.8/bbl, down $0.34/bbl on the day. US markets were closed for the Independence Day holiday. Following a week in which the US infection rate skyrocketed (to a record daily rate of more than 50k), officials issued stark warnings to skip public gatherings on the July 4 holiday. The celebrations were indeed subdued, but they could still cause another spike in the infection rate. A record number of new infections was reported globally on Saturday, with the US, Brazil and India showing the biggest increases, according to the World Health Organization. Worldwide, cases were up 212,326, breaking the previous record of 190,566 set on June 28. The US Centers for Disease Control and Prevention recorded 57,718 new cases on Saturday. We think new infections are likely to continue rising this week, implying a headwind for oil. Investors are unlikely to be expecting a further boost to risk-on sentiment that would provide strong support for oil until the infection rate begins to improve.Brent broke above technical resistance at $43.3/bbl and climbed as high as $43.7/bbl this morning amid global market risk-on and a weaker dollar. Earlier today, Saudi Arabia raised the prices for August oil shipments to Asia, the US and northwest Europe amid further signs of improving demand. Today, investors will primarily be looking out for the US ISM nonmanufacturing PMI for June, due at 17:00 Moscow time. This is likely to dictate market momentum during the second half of the day. The service sector bore the brunt of the economic disruption during the Covid-19 shock, but the worst is likely behind us, and this should be reflected in a further rise in the index in June to near 50 from 45.4 in May. However, there are also downside risks, as the worsening infection rate could cause a setback in consumer sentiment, and any improvement in the service sector in June might not continue in July. Tomorrow sees the EIA's monthly report, while the IEA's monthly report is due on Friday. We think the latest surge in the global infection rate could force the agencies to lower their global oil demand estimates for this year. Coupled with further likely builds in US refined product stocks, this could create headwinds to pressure Brent within the $41.8-42.4/bbl technical range later this week. For today, we think Brent will continue to hover below technical resistance at $43.8/ LD PRICES HAVE RENEWED GAINS FOLLOWING QUIET DAY ON FRIDAYAs we had assumed, with the US on holiday volatility in the market was low on Friday. Gold shed 0.2%, finishing the day at $1,772/oz. This morning, however, quotes are trending higher, approaching $1,778/oz amid a weaker dollar globally. Investment demand for gold remains high: purchases by ETFs climbed 0.75% last week to reach 103.5 moz. Due to the holiday on Friday, the CFTC report for open hedge fund positions will be released today. Today, investors will be keeping an eye out for data on China's gold and currency reserves and the ISM US nonmanufacturing index (17:00 Moscow time). It is entirely possible that gold prices will continue their rise when the US session gets underway. We see technical resistance for gold at $1,789/oz.