Commodities Daily - November 18, 2020

> Oil price under pressure as OPEC+ JMMC makes no formal recommendation to alter supply strategy; EIA data eyed. We expect the EIA data to show a 2 mln bbl decrease in US crude inventories amid higher refining runs and exports. Some pressure could come from downbeat gasoline stockpile data, as suggested by the API release. We think that Brent could rise toward the upper end of its current $43.7-44.5/bbl range today following weekly EIA inventory update that could contradict the API's reported crude oil stock build and consensus estimate.> Gold slides on brief dollar advance and now lacks catalysts to rally above $1,900/oz. Today, investors will be eyeing UK and eurozone inflation and US housing starts, building permits and mortgage applications. Four regional Fed presidents are scheduled to deliver remarks. We expect gold to trade sideways today, meaning it is unlikely to dip below the $1,877/oz mark, which it tested this morning. A break below could pave the way to $1,867/oz, while upside is capped at $1,899/oz.OIL PRICE UNDER PRESSURE AS OPEC+ JMMC MAKES NO FORMAL RECOMMENDATION TO ALTER SUPPLY STRATEGY; EIA DATA EYEDEarly yesterday, front-month Brent was trading around $44/bbl before starting to slide during European trading and eventually falling to $43.1/bbl. This move lower was partially attributable to the OPEC+ JMMC making no formal recommendation to the wider group to alter current production plans, which imply a 2 mln bpd production increase in January. This will keep investors nervous right up to the November 30-December 1 meeting, when OPEC+ will set the supply strategy for next year. As we noted yesterday, if it sticks with the current plan, which was laid out when oil demand forecasts for next year were more upbeat and Libya had not started to restore output, then global inventories are very likely to start building again, which would undermine the efforts made by the group this year. Although it appears that OPEC+ is leaning toward delaying the previously agreed plan to boost output in January, the JMMC's closing statement yesterday said that "all participating countries need to be vigilant, proactive and be prepared to act, when necessary, to the requirements of the market." Another source of price headwinds was the disappointing US October retail sales, which increased less than expected m-o-m amid the surge of new Covid-19 infections and as more and more states are now tightening restrictions, and declining household income, as government financial support has run out for millions of unemployed Americans. On the other hand, October industrial production was upbeat, suggesting that the factory sector is now making up some ground that was lost over the past six months. With inventory levels still lean, manufacturing output could continue rising over the coming months, even if the recovery in consumption falters. During the US trading session, Brent began to pare back earlier losses after President Donald Trump said that US would sharply reduce US forces in Afghanistan and Iraq. Investors began to think that such an action could undermine stability in what is a key oil-producing region, thus threatening supply. Brent eventually settled at $43.75/bbl, fixing $0.07/bbl below the previous settlement. Overnight, the API reported a 4.2 mln bbl increase in US crude stocks last week, to 486 mln bbl. The buildup came amid a 0.21 mln bpd increase in imports and despite a 0.17 mln bpd increase in refinery runs. Crude stocks at Cushing rose 1.6 mln bbl. The refined product data was mixed, showing a 0.25 mln bbl increase in gasoline stocks and a 5 mln bbl decrease in distillate stocks. The EIA inventory report is due today at 18:30 Moscow time. The Bloomberg consensus is for a 1.6 mln bbl crude stock build, a 0.8 mln bbl increase in gasoline stocks and a 1.5 mln bbl draw in distillate stocks. We expect the EIA data to show a 2 mln bbl decrease in US crude inventories amid higher refining runs and exports. Some pressure could come from downbeat gasoline stockpile data, as suggested by the API release. We think that Brent could rise toward the upper end of its current $43.7-44.5/bbl range today following weekly EIA inventory update that could contradict the API's reported crude oil stock build and consensus estimate.GOLD SLIDES ON BRIEF DOLLAR ADVANCE AND NOW LACKS CATALYSTS TO RALLY ABOVE $1,900/OZGold traded sideways at $1,885-1,895/oz for most of yesterday before sliding toward technical support at $1,877/oz overnight. Yesterday afternoon, gold lost support from dollar weakness, as insipid performances in the major US equity indexes caused risk-off flows into the safe-haven dollar, taking EUR/USD down from 1.189 to 1.18. One factor helping this move was disappointing US October retail sales data, which increased by less than expected and lowered inflation expectations. This was due to the surge in Covid infections (with more and more states now imposing restrictions, there is a clear risk of a sharper slowdown) and declining household incomes, as millions of unemployed Americans have lost state support. Furthermore, Fed Chairman Jerome Powell commented that the US economic recovery has a long way to go. Following the recent positive vaccine news, markets were yesterday left to focus once again on the rising infections in key economies, with the mass distribution of a certified vaccine still months away at best, and further stalemate in US stimulus negotiations, which are particularly pertinent for gold investors. Investors expect the Fed to do the heavy lifting to compensate for the US Congress' inability to approve a fiscal stimulus deal. The bank recently expressed a willingness to do more if required. Today, investors will eye UK inflation indexes, eurozone CPI and US releases for housing starts, building permits and mortgage applications. Four regional Fed presidents are scheduled to deliver remarks. We expect gold to trade sideways today, meaning it is unlikely to dip below the $1,877/oz mark, which it tested this morning. A break below could pave the way to $1,867/oz, while upside is capped at $1,899/oz.