Commodities Daily - November 25, 2020

> Oil heads north ahead of EIA inventory update. We expect the EIA data to show a slight increase in US crude inventories (of less than 1 mln bbl), with some pressure coming from downbeat gasoline stockpile data, as hinted at by the API release and the consensus estimates. From a technical perspective, Brent has the potential to rise toward the $51/bbl mark now it has broken past the $46.5-47.4/bbl resistance zone. However, we think this is unlikely to happen today in light of a likely mixed EIA report that could put a stop to the current rally. A batch of US data including the second print of 3Q20 GDP, initial jobless claims, October personal income and spending and durable goods orders also bring potential downside risks to the current upbeat sentiment, so we expect Brent to consolidate around the $48/bbl mark today.> Gold slides to $1,800/oz ahead of Fed minutes and wave of US economic data. Today, the gold market will be digesting a batch of US data including the October PCE deflator, which is likely to show no price growth for the month and could provide an important signal for the Fed that stimulatory policy is needed. One potential trigger for gold today comes from the Fed November meeting minutes, which could shed light on the Fed's willingness to buy more long-term US Treasuries to curb the rise in long-term yields and stimulate the economy. Yesterday's correction brought gold to a critical point - its 200d MA, which today stands at $1,798/oz. A break below this technical support could trigger a strong correction toward $1,783/oz. However, we think this is unlikely and we expect bullion to find support at $1,811/oz and potentially bounce to $1,827/oz later in the day, or at least hover above its 200d MA for one or two days.OIL HEADS NORTH AHEAD OF EIA INVENTORY UPDATEBrent opened near $46/bbl yesterday before climbing to $46.5/bbl and reaching $48/bbl in early US trading amid a global stock market rally, with risk assets gaining momentum as political uncertainty subsided after US President-elect Joe Biden received a formal go-ahead to begin his transition to the White House. The recent coronavirus vaccine news is also driving the current oil price rally. Brent has gained around $12/bbl this month as mass vaccinations are expected to begin late this year and bring with them a swift recovery in global energy demand next year. Meanwhile, China remains the engine for the energy demand recovery this year (importing record amounts of crude), with Premier Li Keqiang highlighting that the world's biggest oil importer will likely return to a more "proper" rate of economic growth next year. This implies that Chinese energy demand will remain robust to accommodate a strong rebound in growth after this year's pandemic-induced slump. China and Japan have also agreed to restart two-way travel by the end of November in a boost to jet fuel consumption, which has been severely curtailed this year. Vaccinations will be key for the recovery in this important segment, which counted for 7% of total oil demand before the pandemic. Brent eventually closed $1.8/bbl higher on the day at $47.86/bbl.Overnight, the API reported a 3.8 mln bbl increase in US crude stocks last week to 490 mln bbl. The buildup came amid a 0.237 mln bpd increase in imports and despite a 0.235 mln bpd increase in refinery runs. Crude stocks at Cushing fell 1.4 mln bbl. The refined product data was mixed, showing a 1.3 mln bbl increase in gasoline stocks and a 1.8 mln bbl decrease in distillate stocks. Despite the bearish report, Brent is rising for a fourth straight day as we write and has peaked at $48.75/bbl, drawing additional support from a weaker dollar. The EIA inventory report is due today at 18:30 Moscow time. The Bloomberg consensus is for a 0.225 mln bbl crude stock build, a 1.15 mln bbl increase in gasoline stocks and a 2.25 mln bbl draw in distillate stocks. We expect the EIA data to show a slight increase in US crude inventories (of less than 1 mln bbl), with some pressure coming from downbeat gasoline stockpile data, as hinted at by the API release and the consensus estimates.From a technical perspective, Brent has the potential to rise toward the $51/bbl mark now it has broken past the $46.5-47.4/bbl resistance zone. However, we think this is unlikely to happen today in light of a likely mixed EIA report that could put a stop to the current rally. A batch of US data including the second print of 3Q20 GDP, initial jobless claims, October personal income and spending and durable goods orders also bring potential downside risks to the current upbeat sentiment, so we expect Brent to consolidate around the $48/bbl mark today. We also think the latest oil price rally has been slightly overdone, as investors appear to have almost fully priced in an OPEC+ decision to delay its 2 mln bpd production increase by three months, implying limited price upside following such a decision.GOLD SLIDES TO $1,800/OZ AHEAD OF FED MINUTES AND WAVE OF US ECONOMIC DATAGold attempted to consolidate near $1,825/oz early yesterday before resuming its recent decline and dipping to the $1,800/oz threshold later in the day. It is stuck in a $1,800-1,810/oz range as we write. Yesterday, gold continued to lose the safe-haven premium built up when the pandemic turned global and investors rushed into gold for its defensive qualities. Bullion is essentially the first asset that comes to mind when investors are faced with extreme uncertainty. The recent vaccine breakthroughs have reduced the extremity of the coronavirus uncertainty and the negative implications for the global economy and have dented Investor demand for gold (as evident from recent ETF outflows). Furthermore, US President-elect Joe Biden has received the formal go-ahead to begin his transition to the White House, reducing the political uncertainty dogging the US. Today, the gold market will be digesting a batch of US data including the second print of 3Q20 GDP, initial jobless claims, October personal income and spending, durable goods orders and the October PCE deflator. The latter is likely to show no price growth for the month, which could provide an important signal for the Fed that stimulatory policy is needed. We do not expect today's data to provide much-needed tailwinds for gold. However, one potential trigger for gold today could come from the Fed November meeting minutes, to be released at 22:00 Moscow time, which could shed light on the Fed's willingness to buy more long-term US Treasuries to curb the rise in long-term yields and stimulate the economy. If this is confirmed, markets are likely to find significant support, though trading should be generally calm ahead of tomorrow's US holiday. Yesterday's correction brought gold to a critical point - its 200d MA, which today stands at $1,798/oz. A break below this technical support could trigger a strong correction toward $1,783/oz. However, we think this is unlikely, and we expect bullion to find support at $1,811/oz and potentially bounce to $1,827/oz later in the day, or at least hover above its 200d MA for one or two days.