Commodities Daily - June 18, 2020

> Oil prices hold steady amid OPEC report and promising EIA inventory data; JMMC meeting today. Today, the market will be keeping a close eye on the OPEC+ JMMC meeting (which could recommend production cut amendments to the wider group), where Iraq and Kazakhstan are expected to present plans for oil production cuts and compensation for overproduction. The technical picture still suggests the possibility of Brent correcting toward technical support at $39.4/bbl. A break below that would open a path toward $37/bbl, though we think this is unlikely, as it would require a very strong global market risk-off move.> Gold prices steady with US jobless claims data on the radar. In the spotlight today will be US initial jobless claims. While claims should continue to their downtrend, layoffs are still massive and the economy won't operate at full capacity for some time. In the near term, job gains will depend on the economy successfully reopening. Continuing claims should continue to drift lower, in line with the ongoing decline in labor market slack. A more upbeat reading may be in the cards today, which could weigh on gold possibly, pressuring it toward the lower end of the $1,708-1,730/oz technical range. A move below this range would be a sign of strong downward pressure.OIL PRICES HOLD STEADY AMID OPEC REPORT AND PROMISING EIA INVENTORY DATA; JMMC MEETING TODAYFront-month Brent rallied almost $1.4/bbl in late Asian and early European trading yesterday to an intraday high of $41.5/bbl, shadowing moves in global equities. However, it failed to hold above $41/bbl and slid back within the $40-41/bbl range ahead of OPEC's monthly report and the EIA inventory report. In contrast to the IEA in its report released a day earlier, OPEC decided to leave its global demand estimate for this year unchanged. However, demand for OPEC crude (the so-called call on OPEC crude) this year was revised down by 0.7 mln bpd, which is a downbeat signal and came amid a 0.3 mln bpd upward revision to non-OPEC supply. The revisions were primarily due to new April-May production data from non-OPEC members in the OPEC+ alliance. This caused OPEC to warn that the market would remain in surplus in 2H20 even as demand improves.Later in the day, attention turned to the EIA weekly report on US oil and refined product inventories. The report was promising and upbeat in parts, although it indicated a buildup in crude oil stocks of 1.2 mln bbl to 539.28 mln bbl. This was rather strange, as it came despite a very strong 0.6 mln bpd drop in oil production to 10.5 mln bpd (the data covered the fallout from Tropical Storm Cristobal, which forced many producers to shut output in the Gulf of Mexico), a 0.22 mln bpd drop in imports to 6.64 mln bpd, a 0.11 mln bpd increase in refinery inputs to 13.6 mln bpd and a slight 0.02 mln bpd increase in exports to 2.46 mln bpd. Inventories at Cushing, the WTI delivery hub, fell yet again by 2.6 mln bbl to 62.44 mln bbl. The refined product data contained much promise, as despite an increase in refining, gasoline stocks dropped 1.66 mln bbl to 257 mln bbl (as drivers are returning to the roads as the economy reopens, helping to whittle down inventories) and distillate stocks eased by 1.35 mln bbl (the first decline in 11 weeks) to 174.4 mln bbl as industrial demand picked up. However, the four-week average for oil product demand remained subdued last week and was still down 20.5% y-o-y, even as lockdowns began to ease in more parts of the country. Total commercial petroleum stockpiles (oil and refined products combined but excluding strategic petroleum reserves) were up 7 mln bbl, largely amid an increase in the "other oils" category. Brent climbed to $41/bbl following the release and eventually settled at $40.71/bbl, $0.25/bbl below the previous settlement.Today, the market will be keeping a close eye on the OPEC+ JMMC meeting (which could recommend production cut amendments to the wider group), where Iraq and Kazakhstan are expected to present plans for oil production cuts and compensation for overproduction. OPEC+'s efforts to rebalance the market are encouraging US shale producers to restore production, with Reuters reporting yesterday, citing crude buyers and analysts, that roughly 0.5 mln bpd of crude output could return by the end of June. The technical picture still suggests the possibility of Brent correcting toward technical support at $39.4/bbl. A break below that would open a path toward $37/bbl, though we think this is unlikely, as it would require a very strong global market risk-off LD PRICES STEADY WITH US JOBLESS CLAIMS DATA ON THE RADARAfter sliding by around $15/oz to $1,715/oz midday yesterday, gold swiftly pared back all of these losses and is hovering just below $1,730/oz as we write. The recovery later in the day came as the S&P 500 edged down 0.4% amid more reports of rising Covid-19 infection rates in parts of the country that had canceled lockdowns earlier. A strengthening dollar in turn provides headwinds, whereas the 28 new Covid-19 cases in China have provided tailwinds for gold. US-China affairs may generate market-moving headlines today. The Wall Street Journal has reported claims that President Donald Trump pled with Chinese President Xi Jinping to make economic concessions in order to help Trump's reelection campaign, among other developments that are likely to generate new concerns for global markets about US-Chinese relations and the US election campaign. In the spotlight today will be US initial jobless claims at 15:30 Moscow time. While jobless claims should continue to their downtrend, layoffs are still massive and the economy won't operate at full capacity for some time. In the near term, job gains will depend on the economy successfully reopening. Continuing claims, a measure of ongoing unemployment reported with a one-week lag, should continue to drift lower, in line with the ongoing decline in labor market slack. A more upbeat reading may be in the cards today, which could weigh on gold possibly, pressuring it toward the lower end of the $1,708-1,730/oz technical range. A move below this range would be a sign of strong downward pressure.