Commodities Daily - November 20, 2020

> Oil remains stable amid a lack of strong catalysts. Today, the market will be watching out for October UK retail sales, October German PPI, November eurozone consumer confidence and the Baker Hughes rig count. We expect Brent to retest support at $43.7/bbl today, a level that proved to be robust yesterday. The main reason for this is the recent rare discord between the US Treasury secretary and Fed chair, who are typically well coordinated during a crisis. Another batch of downbeat Baker Hughes active US oil rig count data could also weigh on oil.> Gold exhibits volatility but is set to remain under pressure due to stimulus stalemate between Fed and Treasury. Important macro releases are thin on the ground today, with November eurozone consumer confidence likely to attract the most attention and likely to be downbeat and weigh on gold. The APEC summit could also generate headlines, while EU leaders will resume stimulus talks. We expect the discord between the Fed and Treasury to weigh on gold today, and we think bullion could retreat to yesterday's low of $1,853/oz as a result. Should the Fed give way to Steven Mnuchin's proposal to redirect $580 bln of unspent stimulus money to prop up small businesses and extend unemployment benefits, then gold could find support amid rising inflation expectations from these further injections into the economy.OIL REMAINS STABLE AMID A LACK OF STRONG CATALYSTSBrent traded sideways in a $43.7-44.6/bbl range yesterday and eventually settled at $44.2/bbl, down $0.14/bbl on the day. Yesterday, the UAE denied reports it is considering leaving OPEC+ amid increasing frustration about what it sees as unfair output targets. Its energy minister asserted that the UAE "has always been a committed member." This statement was seen as an attempt to ease the spat with its OPEC+ partners and was price supportive, and it also reassured investors that OPEC+ is likely to prolong the current 7.7 mln bpd production cut, delaying the 2 mln bpd production increase scheduled for January for another three to six months. These expectations coupled with strong demand in Asia are translating into shrinking Brent time spreads, which is a sign that oversupply concerns are easing. The front-month contango is at -$0.15/bbl as we write, its narrowest since July, while the three-month time spread is also trading at its narrowest since July.Weighing on prices yesterday was downbeat US weekly jobless claims data showing a first w-o-w increase in new unemployment claims in five weeks, highlighting that the US labor market is struggling in the face of the pandemic. The US housing market continues to shrug off the pandemic, with existing home sales rising 4.3% m-o-m in October, a fifth straight month of gains, as record low interest rates continued to support demand. Today, the market will be watching out for October UK retail sales, October German PPI, November eurozone consumer confidence and the Baker Hughes rig count, which could be downbeat yet again and weigh on oil. We expect Brent to retest support at $43.7/bbl today, a level that proved to be robust yesterday. The main reason for this is the recent rare discord between the US Treasury secretary and Fed chair, who are typically well coordinated during a crisis. Treasury Secretary Mnuchin wants to redirect $580 bln of unspent stimulus money to prop up small businesses and extend unemployment benefits, which followed an announcement that he was not extending many of the Fed's emergency lending programs past the end of the year. The fact that the top two US economic policymakers are in disagreement over whether to preserve emergency lending facilities designed to shore up an economy that is now struggling amid rising coronavirus cases and a lack of further stimulus is likely to dent risk asset appetite.GOLD EXHIBITS VOLATILITY BUT IS SET TO REMAIN UNDER PRESSURE DUE TO STIMULUS STALEMATE BETWEEN FED AND TREASURYGold slid by $20/oz yesterday morning to $1,853/oz, the same level it reached last week on Monday after a $110/oz intraday slump following the upbeat Pfizer vaccine reports. Later on, it began to pare back those losses, mirroring swings in EUR/USD. Gold-backed ETFs experienced a selloff for a fifth straight session and have dropped more than 50 tonnes since Pfizer announced its coronavirus vaccine breakthrough last week, as demand for bullion as a haven has waned. Gold pushed back to $1,870/oz as EUR/USD firmed to 1.189 after sliding to 1.182 as US Democrats and Republicans agreed to resume Covid-19 relief talks. Gold tends to benefit from economic stimulus as it is considered to be a hedge against inflation and the currency debasement that can trigger. Gold has run out of upward momentum as we write, reflecting last night's news that the US Treasury Department is seeking to close some backstop emergency lending programs set up with the Fed, which is raising concerns about the US economy in the event that Covid-19 numbers continue to worsen. Fed officials came out on record opposing the request. Important macro releases are thin on the ground today, with November eurozone consumer confidence likely to attract the most attention and likely to be downbeat and weigh on gold. The APEC summit could also generate headlines, while EU leaders will resume stimulus talks. We expect the discord between the Fed and Treasury to weigh on gold today, and we think bullion could retreat to yesterday's low of $1,853/oz as a result. Should the Fed give way to Steven Mnuchin's proposal to redirect $580 bln of unspent stimulus money to prop up small businesses and extend unemployment benefits, then gold could find support amid rising inflation expectations from these further injections into the economy.