Commodities Daily - March 6, 2020

> Oil slides as tensions rise in Vienna, setting the stage for a very volatile day today. The OPEC+ signatories are now either siding with the idea of supporting deeper cuts or facing blame for a possible collapse in the oil price toward $40/bbl or even lower in the months to come. We expect it to be a very trying day at OPEC headquarters, and we anticipate the final decision and press conference to come very late in the day. We think a united but hard-won decision to cut deeper is the most likely outcome and could support Brent within a $53.5-54/bbl range if resistance at $52.8/bbl can be broken.> Gold prices rising amid safe-haven demand. With a flight to safety in full swing, the gold price soared 2.2% on the day yesterday to $1,672/oz. In addition, gold-backed ETFs' holdings were reported to have reached another record high yesterday. According to a World Gold Council report, the monthly increase in February was driven by funds in North America (accounting for 50% of the increase) and Europe (39%). Today will see the US jobs report, trade balance and wholesale inventories. At least six top Fed officials will be speaking at an event in New York as well. Gold is quoted at $1,670/oz as we write.OIL SLIDES AS TENSIONS RISE IN VIENNA, SETTING THE STAGE FOR A VERY VOLATILE DAY TODAYBrent slid $1.3/bbl to $50.7/bbl in early European trading yesterday amid a further drop in equities before swiftly bouncing almost $1/bbl following news that the OPEC ministers in Vienna had agreed to cut production by a hefty 1.5 mln bpd. Given this figure was at the very top of the consensus range heading into the meeting, the $1/bbl represented a fairly subdued market reaction to such a strong cut. This underscores the fact that a sustained oil price rally is unlikely given the weak market sentiment, regardless of the headline cut. It then emerged that the 1.5 mln bpd cut also includes OPEC+, meaning that OPEC expects its allies to contribute 0.5 mln bpd of this figure. Russia had reportedly been resisting cuts, as it is less worried about lower prices and appeared to be betting that the oil market would rebalance by itself over the next few months as low oil prices take their toll. The ministers also said that OPEC is willing to deliver a 1 mln bpd cut only if Russia takes part and stressed that there is no plan B. Meanwhile, Dow Jones reported that OPEC could go it alone with deeper cuts, which certainly goes against the hawkish comments from the OPEC ministers. We think this scenario is rather unlikely. Investors were glued to the headlines emerging from Vienna, with Brent trading sideways within a $50.6-51.3/bbl range as the stock market correction took a breather. However, a couple of hours into the US trading session, Brent began to fall amid a renewed drop in stocks. It eventually settled at $49.99/bbl, $1.14/bbl below the previous settlement. This morning, it remains below $50/bbl ahead of what is shaping up to be a very volatile day, which could be compounded by the release of US nonfarm payrolls for February at 16:30 Moscow time. We think the abrupt production cut announcement by OPEC has complicated matters to an extent not seen since late 2016, when the OPEC+ group was established. Complicating matters further were reports late yesterday that after the OPEC ministers meeting, a grouping gathered in the Saudi delegation's hotel agreed to apply extra cuts for the whole of 2020 and not just for 2Q20, as previously considered. The OPEC+ signatories are now either siding with the idea of supporting deeper cuts or facing blame for a possible collapse in the oil price toward $40/bbl or even lower in the months to come. Riyadh has effectively painted itself in a corner too, with its budget breakeven price standing close to $80/bbl. We see more reasons for Russia to cooperate than not (given the geopolitical and financial benefits of working with OPEC), so we expect Moscow to remain in the deal. Russian oil companies have consistently been opposed to the cuts since 2016, but this has never prevented a deal from being struck. We expect it to be a very trying day at OPEC headquarters, and we anticipate the final decision and press conference to come very late in the day. We think a united but hard-won decision to cut deeper is the most likely outcome and could support Brent within a $53.5-54/bbl range if resistance at $52.8/bbl can be broken.Ahead of the long weekend in Russia, the uncertainty may stimulate risk-off positioning of local trading desks in all asset classes during the LD PRICES RISING AMID SAFE-HAVEN DEMANDNegative news flow about the coronavirus situation has been driving flight to safety. The 10y UST yield continues to drop, having shed 24 bps yesterday to a record low of 0.80%. Against this backdrop, the gold price soared 2.2% on the day yesterday to $1,672/oz and is trading at $1,670/oz as we write. In addition, gold ETF holdings were reported at another record high yesterday. Yesterday, the World Gold Council published data on gold ETFs' holdings in February. The assets held by these ETFs globally grew by 84.5 tonnes during the month amid a net $4.9 bln inflow of investment. Increases were registered across all regions, with the largest seen in North America (42 tonnes, nearly 50% of the total inflows) and Europe (33 tonnes, 39%). Asian funds added just 8.7 tonnes and other funds 0.8 tonnes. It seems that US and European investors' interest in gold has been fueled by expectations of central bank policy easing, as well as Brexit (the share of the UK in global gold ETF holdings has risen to 20%, while its gold ETFs added 12.7 tonnes in February).The highlights on today's data calendar are the February jobs report and wholesale inventories from the US. In addition, at least six Fed officials are expected to speak at a Shadow Open Market Committee meeting in New York. As Dallas Fed President Robert Kaplan suggested yesterday, the data that the Fed usually keeps track of to inform its decision-making has become far less useful recently, so we would expect gold investors to pay closer attention to the rhetoric of policymakers at the meeting than to macro data