Commodities Daily - November 13, 2020

> Oil slides on US crude oil stock build, bearish IEA report and stock market selloff. Today, the oil market will be focused on eurozone 3Q20 GDP, the US PPI for October, Michigan consumer sentiment for November and the weekly Baker Hughes rig count. Prevailing global market risk aversion amid rising infection rates is likely to pressure Brent down to the $42.2-42.9/bbl range today, especially as the Baker Hughes US active oil rig count appears set to disappoint.> Gold prices rise as US Treasury yields slide and dollar weakens. Today, G20 finance ministers and central bank heads are meeting to discuss debt relief for the world's poorest countries. From a technical perspective, the outlook is bearish for gold, which is at high risk of retreating to $1,865/oz. If it reaches this mark, it may begin targeting $1,850/oz.OIL SLIDES ON US CRUDE OIL STOCK BUILD, BEARISH IEA REPORT AND STOCK MARKET SELLOFFBrent was trading around the $44/bbl mark for most of yesterday, staying range-bound at $43.3-44.5/bbl despite various headwinds and eventually settling at $43.53/bbl, down $0.27/bbl on the day. The market was digesting the monthly IEA oil market report, which like the OPEC report released earlier in the week contained downward revisions to the agency's oil demand estimates for this year (-0.44 mln bpd) and next (-0.12 mln bpd). For 2020, the biggest downward adjustments were for Europe, while for 2021, the US bore the brunt, followed by Europe, as the IEA expects Covid-19 to continue to stymie OECD demand in 2021. However, China saw upward revisions for both 2020 and 2021, as demand continues to recover there amid rising industrial output and improving mobility indicators. The IEA said it is far too early to know how and when vaccines will allow normal life to resume and that for now its forecasts do not anticipate a significant impact in 1H21. It also lowered its non-OPEC supply estimate by 0.11 mln bpd for this year and 0.07 mln bpd for next near.Attention later turned to the EIA inventory report, which showed a surprise 4.28 mln bbl build in US crude oil stocks to 488.7 mln bbl last week. The build came amid a 0.47 mln bpd increase in imports to 5.5 mln bpd and a 0.1 mln bpd decrease in refinery inputs to 13.45 mln bpd. A 0.5 mln bpd increase in exports to 2.76 mln bpd was insufficient to offset the overall build. US crude production stayed flat w-o-w at 10.5 mln bpd. The EIA's refined product data was bullish, with gasoline stocks falling 2.31 mln bbl to 225.4 mln bbl and distillate stocks easing 5.35 mln bbl to 149.3 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell by a hefty 11.48 mln bbl amid a 7.8 mln bbl draw in the "other oils" category. Total demand for petroleum products was at its highest since March and provided one of the main bullish takeaways from the report. However, the moving average for gasoline demand appears stuck below 8.5 mln bpd and is still nowhere near the 9 mln bpd level it was at in March, at the start of the pandemic in the US. Oil came under pressure during yesterday's US trading session amid a sharp correction on Wall Street, which fell on pandemic concerns. Europe is grappling with a sharp increase in infections and new social restrictions, while new cases in the US have surpassed 100,000 per day for several days, and more than a dozen states have doubled their caseloads in the past two weeks. Today, the oil market will be focused on eurozone 3Q20 GDP, the US PPI for October, Michigan consumer sentiment for November and the weekly Baker Hughes rig count. Prevailing global market risk aversion amid rising infection rates is likely to pressure Brent down to the $42.2-42.9/bbl range today, especially as the Baker Hughes US active oil rig count appears set to disappoint.GOLD PRICES RISE AS US TREASURY YIELDS SLIDE AND DOLLAR WEAKENSAfter trading near $1,865/oz at the start of the day yesterday, gold prices began to generate upward momentum, eventually nearing the $1,885/oz mark later in the day. One supportive factor was a reversal in the 10y US Treasury yield amid renewed US-China tensions after US President Donald Trump issued an executive order requiring US investors to divest in the securities (and related derivatives) of Chinese companies seen as supporting the Chinese military. However, the response in Asian markets this morning was fairly muted compared with past instances of Trump taking action on China. One of the key reasons for this is likely that the president is widely expected to depart office on January 20. Another factor at play is that daily new coronavirus cases continue to set fresh records, sending investors to the safety of government bonds.Tailwinds were also coming from an uptick in EUR/USD to above 1.18 amid further improvement in the US labor market. Jobless claims were below the consensus at 709k for the week ending November 7. They were down from 757k the week before, extending the streak of declines to four weeks. The US election and Pfizer vaccine tailwinds have waned, leaving markets looking at the ongoing pandemic and the lack of movement on US stimulus negotiations. Still, it is worth highlighting that in the coming days Moderna is expected to release crucial data from a late-stage vaccine trial, which could renew the vaccine optimism. But as Fed Chairman Jerome Powell noted yesterday, near-term economic risks remain, as infections have only continued to rise globally, underscoring the need for additional government stimulus.Today, G20 finance ministers and central bank heads are meeting to discuss debt relief for the world's poorest countries. Separately, the heads of the BoE and Bundesbank will deliver remarks. Eurozone 3Q20 GDP, US October PPI and November Michigan confidence will be the most watched macro releases. Chinese industrial production and retail sales, as well as Japanese GDP and industrial production, are due early Monday. From a technical perspective, the outlook is bearish for gold, which is at high risk of retreating to $1,865/oz. If it reaches this mark, it may begin targeting $1,850/oz.