Commodities Daily - March 26, 2020

> Oil trades sideways, tracking equities, amid downbeat EIA report; G20 and US jobless claims on the radar. A G20 virtual summit has been scheduled for today to address the economic effects of Covid-19. Oil prices will also likely be a main discussion point. The day's most important macro data release will be US weekly initial jobless claims, which the Bloomberg consensus estimates at nearly 1.7 mln, which would be a record high. Some think tanks have offered estimates even double that sum, and a worse figure than the consensus could put a damper on stimulus-driven exuberance and weigh on risk assets later in the day. This, in our view, would weigh on Brent, which is likely to slip below $26/bbl, possibly even retesting this year's low of $24.5/bbl.> Gold consolidating around $1,610/oz following several days of high volatility. The key highlights today will be Jerome Powell's interview with NBC at 14:00 Moscow time, the G20 teleconference at 15:00 and US initial jobless claims at 15:30. If the US jobless claims come out very bad, we would expect gold to retreat to $1,575/oz.OIL TRADES SIDEWAYS, TRACKING EQUITIES, AMID DOWNBEAT EIA REPORT; G20 AND US JOBLESS CLAIMS ON THE RADARAfter trading around $28/bbl during the Asian session yesterday, front-month Brent started to slide in the early European trading hours amid a short-lived risk-off mood in global markets. Midday, Brent plummeted to an intraday low of $25.7/bbl before starting to pare its losses. Another slightly downbeat EIA report again failed to generate much volatility, as investors are still focused on the strong stock builds expected in the months to come. The EIA reported a rather mild 1.6 mln bbl increase in US crude stocks (in line with our expectation of a 1-2 mln bbl build) to 455.3 mln bbl last week, compared with the Bloomberg consensus of a 3 mln bbl build and the API's reported 1.2 mln bbl draw. The build came amid a strong 0.53 mln bpd decrease in exports to 3.85 mln bpd and unseasonably subdued refinery inputs that were almost unchanged w-o-w (up 0.018 mln bpd to 15.8 mln bpd). A 0.42 mln bpd decrease in imports to 6.1 mln bpd and a 0.1 mln bpd drop in crude output to 13.0 mln bpd failed to offset the overall build. The global spread of the coronavirus and increase in the supply of cheap, discounted crude amid lower refinery demand globally will continue weighing on US crude exports in the coming months, causing major stock builds. The EIA's refined product data yesterday was mostly bullish, with gasoline stocks down 1.5 mln bbl to 239.3 mln bbl and distillate stocks down 0.68 mln bbl to 124.4 mln bbl. However, total petroleum stocks (including oil but excluding US strategic petroleum reserves) were up 2.45 mln bbl amid a strong gain in the "other oils" category. As we had expected, the rate of the seasonal drawdown in refined product stocks, which has been particularly strong since mid-February, did in fact start to ease, reflecting emerging weakness in motor fuel demand, which is set to plummet in the weeks ahead. In fact, the EIA's proxy for US demand showed a 2.1 mln bpd fall in the most recent week to 19.4 mln bpd, driven by the travel restrictions due to the coronavirus.Despite the slightly downbeat EIA report, Brent staged a swift recovery toward $28/bbl in late trading on Wall street amid an uptick in equity markets on optimism over the $2 trln US fiscal stimulus package intended to cushion the economic shock the coronavirus pandemic has started to inflict. Brent eventually settled at $24.88/bbl, fixing $3.85/bbl below the previous settlement. A G20 virtual summit has been scheduled for today to address the economic effects of Covid-19. Saudi Arabia is the host, and international bodies like the WHO and IMF will also be represented. Oil prices will also likely be a main discussion point. The day's most important macro data release will be US weekly initial jobless claims, which the Bloomberg consensus estimates at nearly 1.7 mln, which would be a record high. Some think tanks have offered estimates even double that sum, and a worse figure than the consensus could put a damper on stimulus-driven exuberance and weigh on risk assets later in the day. This, in our view, would weigh on Brent, which is likely to slip below $26/bbl, possibly even retesting this year's low of $24.5/ LD CONSOLIDATING AROUND $1,610/OZ FOLLOWING SEVERAL DAYS OF HIGH VOLATILITYIntraday volatility in the gold market was once again high yesterday, with swings of up to $50/oz. Gold reached its high point for the day of around $1,640/oz during Asian trading but by the European open had begun stabilizing around the $1,610/oz level. The macro data released yesterday had a neutral effect on prices. The Ifo German business climate index came in at 86.1, which is down from the previous month's 87.7. However, US durable goods orders rose 1.2% in February, although stripping out transportation orders the figure showed a 0.6% decline. Meanwhile, markets remain on edge. The virus is spreading quickly in the US - 10,000 new infections were reported in just one day, while the death count has now surpassed 1,000. Investors will be looking out for a TV interview with Fed Chairman Jerome Powell at 14:00 Moscow time, while an hour later a video conference of the G20 will get underway. Discussions will center on fighting the virus and supporting the economy. At 15:30, meanwhile, US initial jobless claims will be issued. The Bloomberg consensus expects them to surge to 1.64 mln (the previous figure was a "normal" 281k). Such a spike is entirely within the realm of possibility, especially considering the weak print from Canada for the week ending March 16 (Bloomberg has reported Canadian jobless claims at 929k that week, although this figure hasn't been released yet). If the US figures come in very bad and if the G20 is unable to adopt forceful measures, we would expect gold to retreat to $1,575/oz.