Commodities Daily - May 15, 2020

> Oil climbs on upbeat IEA report and higher Chinese refinery runs. Today the market awaits eurozone 1Q20 GDP, the Fed's 2020 financial stability report, the Empire State manufacturing survey, US retail sales, industrial production, Michigan confidence and the Baker Hughes rig counts. Souring relations between the US and China will likely continue to make headlines. Prevailing positive oil price momentum is likely to push Brent toward technical resistance at $33.2/bbl, though we think this mark is unlikely to be broken today. We think the upward momentum remains fragile and we will see further selloffs this month. We do not expect a sustainable oil price recovery until June.> Gold prices approaching $1,740/oz. Yesterday saw US initial jobless claims, while today a number of key macro releases are due. GDP is due for a number of European countries and the eurozone, while in the US the Fed's 2020 financial stability report and Empire State manufacturing print are due. We expect gold prices to resume growing during the US session and potentially test technical resistance at $1,747/oz.> Base metals mixed after this morning's data from China. This morning, China published some rather encouraging industrial production data. Overall output was up 3.9% y-o-y in April, topping the consensus estimate of 1.5% growth. Steel and aluminum output were also up versus last April's levels. As we write, copper is up almost 1% and aluminum has added 0.5%, while nickel remains under pressure and is off 0.6%.OIL CLIMBS ON UPBEAT IEA REPORT AND HIGHER CHINESE REFINERY RUNSFront-month Brent began to pick up positive momentum yesterday morning and was up by around $0.8/bbl from its intraday low of $28.9/bbl ahead of the IEA's monthly report. In contrast to the EIA and OPEC monthly reports released earlier this week, the IEA raised its global demand estimate for this year. Its more positive tone was due to stronger-than-expected social mobility in some European countries and the US, as well as increased Chinese demand as the country recovers from the virus. The IEA now expects global demand to fall by 8.63 mln bpd this year to 91.23 mln bpd (it previously expected a 9.3 mln bpd drop to 90.56 mln bpd). It expects non-OPEC supply to contract 3.27 mln bpd this year (much more than the 2.31 mln bpd decrease it was projecting a month ago) mainly due to stronger declines in the US and Canada. Demand for OPEC crude this year (the so-called "call on OPEC crude") was revised upward by a strong 1.64 mln bpd to 23.73 mln bpd, as the considerable downward revision to non-OPEC supply was combined with the upward revision to demand. The IEA forecasts that demand for OPEC crude will fall by 5.14 mln bpd this year and the call on OPEC crude will peak in 4Q20 at 30.83 mln bpd, with a low of 13.12 mln bpd in 2Q20. IEA director Fatih Birol yesterday said that early signs of a recovery are emerging, but it is far too early to say that the market will be rebalanced anytime soon.The upbeat IEA report set the tone for the day, with front-month Brent rising and eventually settling at $31.13/bbl, $1.94/bbl above the previous settlement. This morning it is rapidly approaching the $32.5/bbl mark, drawing support from Chinese data showing that country's crude oil refining output surged to 13.1 mln bpd in April from 11.78 mln bpd in March (and was also up 0.8% y-o-y) as refiners boosted operations to meet renewed fuel demand following the relaxation of the coronavirus lockdowns. At present, Chinese people seem to prefer spending an hour sitting in Beijing traffic rather than risking 30 minutes exposed to crowds on trains, while a large number of companies are asking their employees to avoid public transportation at all costs. Similar trends are likely to emerge globally once more countries follow China's lead in easing restrictions. Another interesting trend supporting gasoline demand is a change in the way people are likely to vacation this summer, with US demand for long-haul recreational vehicles picking up as people opt for road trips over air travel.Today the market awaits eurozone 1Q20 GDP, the Fed's 2020 financial stability report, the Empire State manufacturing survey, US retail sales, industrial production, Michigan confidence and the Baker Hughes rig counts. Souring relations between the US and China will likely continue to make headlines following yesterday's news that the US Senate had passed a bill to sanction Chinese officials over human rights and remarks by the US president that he has no intention of speaking with his Chinese counterpart for the foreseeable future. The prevailing positive oil price momentum is likely to push Brent toward technical resistance at $33.2/bbl, though we think this mark is unlikely to be broken today. We think the upward momentum remains fragile and we will see further selloffs this month. We do not expect a sustainable oil price recovery until LD PRICES APPROACHING $1,740/OZGold continued to trade within a narrow range early in the day yesterday, but then surged higher following the release of US initial jobless claims, which showed 2.98 mln new claims for the week ending May 9. This is down from the 3.18 mln the week before but above the consensus of 2.5 mln. Continuing claims climbed from 22.4 mln to 22.8 mln. Gold had been trading at around $1,710/oz before the data release but added 1.5% within the first few hours afterwards. It is also entirely possible that investor sentiment was affected by comments by Donald Trump, who talked about the importance of a strong dollar and the need for negative rates. He also expressed a willingness to consider new fiscal measures to combat the effects of the virus. Today is a fairly event-filled day for macro releases. GDP is due for a number of European countries and the eurozone, while in the US the Fed's 2020 financial stability report and Empire State manufacturing print are due. We expect gold prices to resume growing during the US session and potentially test technical resistance at $1,747/ SE METALS MIXED AFTER THIS MORNING'S DATA FROM CHINAOver the past few days, base metal prices have been driven by rhetoric from Washington pointing to a potential escalation in the US-China trade war. This week, President Donald Trump made several harsh comments aimed at China during an interview with Fox Business, even going so far as to threaten to "cut off the whole relationship" with China due to the situation with the coronavirus. The US Senate also passed a bill imposing sanctions on Chinese officials over the repression of Muslims in the Xinjiang region. Base metal prices are mixed this morning following the publication of some rather strong data on industrial output and investment in China. Industrial production grew 3.9% y-o-y in April, a significant improvement from the 1.1% contraction in March. Meanwhile, investment in fixed assets was up 0.6% y-o-y after plunging 9.4% in March. Aluminum output was up 1.5% y-o-y to 2.97 mln tonnes (which translated into 99 ktpd, up from 95.8 ktpd in March), while steel production came in 0.2% higher at 85 mln tonnes. All in all, the data suggests that metal production in China has more or less fully recovered since the lockdowns were lifted, though going forward much will depend on domestic