Commodities Daily - June 22, 2020

> Oil rebounds after a setback in risk appetite; resurgence in new coronavirus cases in focus. Investors at the moment are weighing the magnitude of the oil demand recovery against a rebound in new coronavirus cases. We think the former will likely eventually take the upper hand in the coming weeks. This week, we think Brent is likely to battle technical resistance at $43.6/bbl. Preliminary DM PMIs for June begin coming in tomorrow, while new IMF economic forecasts and weekly EIA oil data are both due on Wednesday.> Gold climbs 1.2% to $1,744/oz on Friday. The mood in global financial markets remains cautious due to concerns over the spread of Covid-19. Investors have continued to increase their exposure to gold judging by the latest CFTC data, which showed a significant increase in hedge funds' long positions. The highlight today data-wise is US existing home sales, scheduled for release at 17:00 Moscow time.OIL REBOUNDS AFTER A SETBACK IN RISK APPETITE; RESURGENCE IN NEW CORONAVIRUS CASES IN FOCUSDuring the first half of the day on Friday, front-month Brent was picking up momentum, gaining almost $1.5/bbl and falling just short of breaking above $43/bbl. However, once the US session got underway, prices started to plummet toward $41/bbl (the intraday low was $41.03/bbl) amid a 0.6% drop on the S&P 500 to 3,098. The US retreat was widely blamed on more negative Covid-19 statistics from key US states: more than 30k new cases were reported in the US for both Friday and Saturday. Other current virus hot spots are the Chinese capital of Beijing and Australia's second-most populous state of Victoria, where spikes in infections are being reported. Yesterday, the WHO reported a record increase of 183,020 global coronavirus cases in a 24-hour period. The biggest gains were registered in North and South America, with over 116,000 new cases. This puts the global total at over 8.7 mln, while the death count is over 461,000. Also note that following the JMMC video conference, Saudi Arabia's energy minister highlighted that the world economy has embarked on the long journey of easing the lockdowns, but there will inevitably be setbacks and reversals, and that the possibility of a second wave of infections cannot be ruled out. Remarks such as these could be an important indicator of whether the current output cut deal will be extended for another month. Later on Friday, Brent managed to pare back some of the earlier losses and consolidated near the $42/bbl mark, before eventually settling at $42.19/bbl, fixing $0.68/bbl above the previous settlement. One of the factors providing support at the time, apart from global stock markets having stabilized, was the Baker Hughes report, which showed yet another sharp drop in the weekly active US oil rig count (down 10 units to 189). Despite the recent rebound in prices, US and Canadian energy firms have still been cutting the number of active oil and natural gas rigs to a record low, although some producers have reportedly started drilling again. Investors at the moment are weighing the magnitude of the oil demand recovery against a rebound in new coronavirus cases. We think the former will likely eventually take the upper hand in the coming weeks. One indication of this is that Brent's front-month calendar spreads have moved back into backwardation (meaning prompt contracts are more expensive than later-dated ones). This is a bullish signal that indicates supplies are tightening. However, we think that more distant contracts will follow suit no earlier than in August-September. The main headwinds for a more pronounced backwardation are the poor refinery margins and still-brimming storage tanks. This week, we think Brent is likely to battle technical resistance at $43.6/bbl. Preliminary DM PMIs for June begin coming in tomorrow, while new IMF economic forecasts and weekly EIA oil data are due on LD CLIMBS 1.2% TO $1,744/OZ ON FRIDAYPersisting concerns over the spread of Covid-19 caused global demand for defensive assets to pick up on Friday. Gold prices jumped at the US open and finished up 1.2% from Thursday's close. In a speech on Friday, Boston Fed President Eric Rosengren stressed that additional fiscal and monetary stimulus was needed to prop up the US economy in light of the high level of unemployment and low level of inflation.Investment demand for gold has been growing. Gold ETFs increased their holdings by 1.15% last week, while CFTC data for the week ending June 16 indicated that hedge funds' long positions in gold had increased nearly 7% w-o-w to 174k contracts, with short positions shrinking 15% to 30.6k contracts. The highlights on today's macro agenda are US existing home sales and the Chicago Fed's economic activity index. Gold is trading at $1,748/oz as we write, having come off an intraday high of $1,758/oz.