Commodities Daily - July 8, 2020

> Oil trades sideways on mixed EIA monthly report and API inventory data; EIA stockpile data eyed. We expect the EIA's weekly crude oil inventory data to be more bearish than the API numbers, showing a buildup of 3-4 mln bpd amid lower exports and higher imports. We are also skeptical over the API's upbeat refined product readings amid the resurgence of the coronavirus in California, Texas and Florida. We therefore also expect yet another overall buildup in total oil and refined product inventories. We think this could be sufficient for Brent to escape its current $42.7-43.5/bbl technical range and move toward technical support at $41.8/bbl.> Gold approaching $1,800/oz following very soft rhetoric from Fed. In remarks yesterday, several Fed officials emphasized that stimulus-based policy would stay in place. Trump also reiterated that a new stimulus package was needed. This supported gold prices, which tested technical resistance at $1,797/oz. We think gold has every chance to break through the $1,800/oz mark during the US session today. OIL TRADES SIDEWAYS ON MIXED EIA MONTHLY REPORT AND API INVENTORY DATA; EIA STOCKPILE DATA EYEDFront-month Brent was trading sideways within a $42.5-43.5/bbl range yesterday ahead of the EIA's monthly report. The agency's monthly revisions were mixed, providing little direction for the market. On the bearish side, it suggested that US crude production will fall by 0.60 mln bpd this year (it forecast a larger decrease of 0.67 mln bpd last month). The EIA also raised its 2020 non-OPEC supply estimate by 0.32 mln bpd and now expects a decrease of 2.24 mln bpd y-o-y (versus last month's forecast for a 2.55 mln bpd decline). On the bullish side, the agency lifted its 2020 global demand forecast by 0.36 mln bpd (despite the latest surge in the global infection rate) and now expects a 8.15 mln bpd y-o-y drop to 92.89 mln bpd (versus the 8.34 mln bpd drop it forecast last month). The statement was rather upbeat, indicating that the global oil market appears to be rebalancing faster than the EIA had previously forecast. Brent generally tracked the S&P 500 during the day and eventually settled at $43.08/bbl, $0.02/bbl below the previous settlement. The virus set new records across the US, with Texas's daily cases, Arizona's deaths and California's hospitalizations hitting new highs. New Jersey's transmission rate rose to the highest in about 10 weeks.Overnight, the API reported that US crude stocks increased 2.05 mln bbl to 539 mln bbl last week (versus the EIA's latest figure of 533.5 mln bbl). The stock build came amid a 0.56 mln bpd increase in imports and despite a 0.24 mln bpd increase in refinery runs. Crude stocks at the Cushing were up 2.2 mln bbl. The refined product data was upbeat, showing a 1.8 mln bbl draw in gasoline stocks and a 0.84 mln bbl drop in distillate inventories. Investors are now positioning for the EIA inventory report today at 17:30 Moscow time. The Bloomberg consensus is calling for a 3.25 mln bbl crude stock draw, a 0.55 mln bbl increase in gasoline inventories and a 0.28 mln bbl gain in distillate stocks.We expect the EIA's weekly data to be more bearish than the API numbers, showing a buildup of 3-4 mln bbl amid lower exports and higher imports. We are also skeptical over the API's upbeat refined product readings amid data from GasBuddy (a tech company that collects user-submitted real-time retail fuel data) showing that US retail fuel sales were down 4.1% w-o-w on Sunday, reflecting the resurgence of the coronavirus in California, Texas and Florida. We therefore expect yet another overall buildup in total oil and refined product inventories. We think this could be sufficient for Brent to escape its current $42.7-43.5/bbl technical range and move toward technical support at $41.8/ LD APPROACHING $1,800/OZ FOLLOWING VERY SOFT RHETORIC FROM FEDEarly yesterday, gold was trading in a narrow range of $1,775-1,780/oz but then started moving sharply higher during the US session. The tone in markets was largely set by comments from Fed officials. Loretta Mester said it might take quite a long time to get back to where activity and employment were pre-pandemic, while Richard Clarida stated that a lot of accommodation was already in place but that more can be done, adding that there was "no limit" for Fed bond purchases. Raphael Bostic, meanwhile, noted the high level of uncertainty for businesses and stated his view that the next 3-6 weeks would be decisive for the US economy. The Fed rhetoric buoyed gold investors. Bullion reached technical resistance at $1,797/oz and closed just shy of $1,800/oz, a gain of 0.6% on the day. The yield on US 10y Treasuries dropped 3 bps to 0.64%. Sentiment so far today has also been conducive to buying defensive assets. We think gold has every chance to break through the $1,800/oz mark during the US session today.