Commodities Daily - March 18, 2020

> Oil keeps falling despite unprecedented policy response; EIA data eyed. We expect the EIA to report a crude inventory build of 1-2 mln bbl today given seasonally subdued refinery runs and weaker exports. Strong draws in refined products are very likely to outweigh the expected crude buildup. This, however, would most likely provide little support for prices given how damaged sentiment is and given that investors are probably very confident that stocks will build in the weeks and months to come. At the start of the week, we said that Brent is likely to fall into a technical corridor of $27.1-29.8/bbl this week. We expect it to test the lower boundary of this range today.> Gold continues to be very volatile. Government and central bank support announced yesterday helped gold to rise to about $1,550/oz. However, the mood has soured across markets. The Fed meeting - which had been the main event for the gold market today - has been cancelled. Investors will be looking out for eurozone CPI and US mortgage applications, building permits and housing starts. Gold is trading at $1,510/oz as we write.OIL KEEPS FALLING DESPITE UNPRECEDENTED POLICY RESPONSE; EIA DATA EYEDAfter trading near $31/bbl during the Asian trading session yesterday, front-month Brent started to slide right after the European markets opened and major stock indexes began to drop. After oscillating around $30/bbl, it fell yet again and eventually settled at $28.73/bbl, fixing $1.32/bbl below the previous settlement, this despite a rare upswing in global equity markets later in the day. Stocks were supported by governments across the globe continuing to announce fiscal stimulus and public health plans. The main highlight of the day came from the US, where officials announced an $850 bln direct stimulus bill and other plans that Bloomberg estimates add up to $1.2 trln in total. The Fed also opened multiple new anti-crisis facilities to ensure liquidity. The UK announced stimulus measures in the hundreds of millions of pounds, and the EU formally announced the closure of its borders to foreigners. While these actions should provide strong support to the global economy once the coronavirus is contained, any potential surge in global equities would most likely have only a limited impact on oil. The main reason for this is, of course, the looming oil and refined product glut. Saudi Arabia did not help matters yesterday with its announcement that it would boost exports to above 10 mln bpd (Bloomberg estimates that Saudi exports during the first two months of this year amounted to 7 mln bpd).Overnight, the API reported that US crude stocks fell 0.42 mln bbl to 452.6 mln bbl last week (the EIA's latest report estimated them at 451.8 mln bbl). The drawdown came amid a 0.25 mln bpd decrease in imports and a 0.16 mln bpd increase in refinery runs. The refined product data was bullish, showing a 7.8 mln bbl draw in gasoline stocks and a 3.6 mln bbl decrease in distillate inventories. Investors are now positioning themselves for the EIA report today at 17:30 Moscow time. The Bloomberg consensus sees a 3.7 mln bbl build in crude stocks, a 3.8 mln bbl decrease in gasoline stocks and a 2.45 mln bbl drop in distillate stocks. We expect the EIA to report a crude inventory build of 1-2 mln bbl on seasonally subdued refinery runs and weaker exports. Strong draws in refined products are very likely to outweigh the expected crude buildup. This, however, would most likely provide little support for prices given how damaged sentiment is and given that investors are probably very confident that stocks will build in the weeks and months to come. At the start of the week, we said that Brent is likely to fall into a technical corridor of $27.1-29.8/bbl this week. We expect it to test the lower boundary of this range LD CONTINUES TO BE VERY VOLATILEYesterday, governments and central banks across the globe continued to announce measures to support the economy and financial markets. They had a neutral effect on gold prices early on, but with the US open moods in markets brightened on the news that the US government was considering a stimulus bill worth $850-1,200 bln. In addition, the Fed announced a program to buy commercial paper directly from issuers and also said it would increase O/N repo operations by $500 bln. The dovish plans drove a rally in gold, which rose above $1,550/oz during the US trading session. However, the mood has soured across markets. Global coronavirus cases have nearly reached 200k, and the Fed meeting - which had been the main event for the gold market today - has been cancelled. Investors will be looking out for eurozone CPI and US mortgage applications, building permits and housing starts. If the negative sentiment continues today, we think gold could drop below $1,500/oz. It is trading at $1,510/oz as we