Commodities Daily - November 10, 2020

> Oil skyrockets amid promising Covid-19 vaccine news and OPEC+ signaling it will reconsider raising output in January. Today, the oil market will continue to follow the ADIPEC virtual conference, with speakers including the Iraqi oil minister, the IEA's executive director and CEOs from ENI and Vitol. The monthly EIA oil market report will be released later in the day. We think Brent is likely to stabilize above technical support at $41.6/bbl, with a path back toward the $42.9-43.8/bbl resistance zone likely to be complicated by expectations that the EIA will yet again lower its oil demand estimates in its monthly report.> Gold freefalls amid rise in US yields following upbeat Covid vaccine news. Should the rebound in bond yields continue, after sparking bullion's biggest intraday fall in almost seven years yesterday, gold could head toward the closely watched Fibonacci support level of $1,835/oz and its 50d MA of $1,830/oz. However, should it begin to consolidate today without suffering further losses, then a rise toward resistance at $1,894/oz would be in the cards.OIL SKYROCKETS AMID PROMISING COVID-19 VACCINE NEWS AND OPEC+ SIGNALING IT WILL RECONSIDER RAISING OUTPUT IN JANUARYBrent climbed $1/bbl to $40.5/bbl yesterday morning on news that Joe Biden had won the US election, with the Republicans likely maintaining control of the Senate, which augurs some combination of fiscal stimulus (though probably less than there would have been under a Democratic Senate) and less risk for corporate earnings than under a Democratic Senate. Biden's tax plan includes a hike in corporate tax from 21% to 28%, but he is now less likely to succeed. Following this, investors turned their attention to the ADIPEC virtual conference, where top OPEC+ officials were commenting on next year's planned oil production increase. The Saudi energy minister delivered cautious but fairly upbeat remarks, saying that the current agreement could be "tweaked" and by more than analysts expect. The minister also acknowledged that the emergence of an effective vaccine could transform the oil market, causing a recovery in mobility and restoring a state of normality to the global economy.A few hours later Brent abruptly shot up toward $43.5/bbl after Pfizer announced promising results for its Covid-19 vaccine, which forced traders to rush to unwind bearish bets formed amid fears of subdued winter demand, tightened lockdowns and rising coronavirus infections. The vaccine is reportedly more than 90% effective based on initial trial results and has delivered no serious safety concerns. Pfizer and German partner BioNTech are now expected to seek US emergency use authorization this month. The positive vaccine news could also have an impact on OPEC+'s decision at its November 30-December 1 meeting and could result in a less bullish tweak to the current parameters. Brent later slid to $42/bbl, mirroring the S&P 500 amid dollar strengthening and yet again failed to push past the $43.5-44/bbl zone, which it has been struggling to do since mid-September. It eventually settled at $42.4/bbl, up $2.95/bbl on the day.Today, the oil market will continue to follow the ADIPEC virtual conference, with speakers including the Iraqi oil minister, the IEA's executive director and CEOs from ENI and Vitol. The monthly EIA oil market report will be released later in the day. We think Brent is likely to stabilize above technical support at $41.6/bbl, with a path back toward the $42.9-43.8/bbl resistance zone likely to be complicated by expectations that the EIA will yet again lower its oil demand estimates in its monthly report. However, the promising vaccine news could diminish the bearish impact of expected downward revisions to demand estimates by the EIA, OPEC and IEA in their monthly reports this week. These reports are likely to have been strongly influenced by the new lockdowns in Europe (with Rystad Energy assuming a 1 mln bpd loss in demand by the end of this year) and were formed prior the positive vaccine news.GOLD FREEFALLS AMID RISE IN US YIELDS FOLLOWING UPBEAT COVID VACCINE NEWSGold was trading near $1,960/oz yesterday morning but plunged on news that Pfizer and BioNTech had announced a 90% success rate in the early results for a Covid-19 vaccine. The news sparked a selloff in the bond markets, driving the benchmark 10y yield to its highest level since March. The US yield curve, an indicator of risk appetite, hit its steepest level since February 2018, with yields also benefiting from the clarity over last week's US presidential election. As Treasury yields climbed, cutting into the negative real rates that have supported bullion this year, gold hurtled toward the $1,850/oz mark, also pressured by positive dollar momentum. Although the dollar typically makes gains when risk appetite declines, yesterday's transformation in US Treasury yields served to strengthen the greenback as well. The still early stage of trials, profit taking and remarks from US Senate Majority Leader Mitch McConnell that only a limited stimulus bill should be passed before the year-end saw markets trim back their exuberance later in the day.In our view, gold's positive fundamental factors have not gone away, as the Fed is unlikely to alter its ultra-dovish monetary policy despite the positive vaccine news, and the new round of US fiscal stimulus will provide strong support for gold. We think that yesterday's developments will only serve to delay gold's anticipated move higher, and this view is widely shared by the market. This means that yesterday's selloff is likely to precipitate opportunistic dip buying activity. However, we think dip buyers are unlikely to step in aggressively right now, as they will be afraid to catch the proverbial "falling knife" given how abrupt and brutal yesterday's correction was and fearing that further profit taking might cause more declines today. We think gold could head toward the closely watched Fibonacci support level at $1,835/oz and its 50d MA at $1,830/oz should the rebound in bond yields continue after sparking bullion's biggest intraday fall in almost seven years yesterday. However, should it begin to consolidate today without suffering further losses, then a rise toward resistance at $1,894/oz would be in the cards.