Commodities Daily - October 12, 2020

> Oil slides on easing supply constraints in US, Libya and Norway. We expect Brent to remain under pressure today as US energy companies have begun to restore 1.7 mln bpd of offshore crude oil production in the Gulf of Mexico that was shut following Hurricane Delta (which made landfall on Friday), while Libya is taking steps to reopen the 0.3 mln bpd Sharara oil field, and Norwegian oil firms struck a wage bargain with labor unions on Friday, resolving a strike that had threatened to cut the country's oil and gas output by close to 25%. We think Brent is likely to break below its 200d MA at $42.25/bbl today and possibly even test support at $41.6/bbl.> Gold advances amid progress on US stimulus package. The dollar is weakening, as the chances of a US fiscal stimulus package later this year (or by mid-1Q21 at the latest) are rising, which is supportive for gold. Today, investors will be following the annual joint meeting between the IMF and World Bank, which will end next Sunday, while the Institute of International Finance's annual meeting lasts from today through Friday. Many leading central bankers will speak at these events or elsewhere today, including ECB President Christine Lagarde. We think gold is likely to test its 50d MA at $1,939/oz later today.OIL SLIDES ON EASING SUPPLY CONSTRAINTS IN US, LIBYA AND NORWAYOn Friday, front-month Brent twice attempted and failed to break above $43.5/bbl despite tailwinds from rising stock market indexes and a weakening dollar, which is struggling amid optimism that President Trump will approve a revised stimulus package. However, Brent slid below $43/bbl later in the day and eventually settled at 42.61/bbl, $0.75/bbl above the previous settlement. The negative momentum was prompted by Norwegian oil firms striking a wage deal with labor unions, resolving a strike that had threatened around 0.5 mln bpd of the country's 2 mln bpd oil output. Friday's Baker Hughes rig count data provided further negative impetus, as the active US oil rig count rose by four units to 193. The active rig count began to increase in late September after stagnating at around 180 since early July.Brent is under further pressure as we write and is battling its 200d MA at $42.25/bbl, as US energy companies have begun restoring 1.7 mln bpd of offshore crude oil production in the Gulf of Mexico that was shut following Hurricane Delta, which made landfall on Friday, while Libya is taking its first steps to reopen the 0.3 mln bpd Sharara oil field, the country's largest. Libyan oil production is now expected to climb to 0.355 mln bpd today as force majeure was lifted on the Sharara field on Sunday. Today is also Columbus Day in the US, though oil futures exchanges remain open. Due to the holiday, US oil and refined products inventory data will be released a day later this week. This week, investors are also awaiting the latest OPEC and IEA supply and demand forecasts for the rest of this year and 2021 (on Tuesday and Wednesday, respectively). On the back of easing supply constraints in the US, Libya and Norway, we expect Brent to break below its 200d MA at $42.25/bbl today and possibly even test support at $41.6/bbl.GOLD ADVANCES AMID PROGRESS ON US STIMULUS PACKAGEAfter hovering above $1,895/oz at Friday's opening, gold prices rallied all the way to $1,930/oz late in the US session, mainly thanks to a decline in the dollar. EUR/USD jumped from 1.176 to 1.183 as investors were positioning for the rising likelihood of a substantial US fiscal stimulus package to come later this year (or by mid-1Q21 at the latest), based on the latest soundbites from both Republican and Democratic leaders as well as Joe Biden's increasing lead in the polls. On Friday, White House economic advisor Larry Kudlow said that President Trump had approved a revised $1.8 trln stimulus proposal. The sum had previously stood at $1.6 trln, although the Democrats are still seeking $2.2 trln. Rising US inflation expectations over the next 10 years suggest that a major bill will come after the elections, no matter who wins the White House.This morning, investors are digesting news out of China. The PBoC has decided to pull back on some currency control mechanisms, and the Chinese government could this week unveil new policies to open up more industries to foreign investment. Today, investors will be following the annual joint meeting between the IMF and World Bank, which will end next Sunday, while the Institute of International Finance's annual meeting lasts from today through Friday. Many leading central bankers will speak at these events or elsewhere today, including ECB President Christine Lagarde. Chinese trade data I due early tomorrow, while the World Economic Outlook will be the most notable release on a busy day for the macro calendar. The US presidential debate scheduled for Thursday has been canceled, though the two sides and the organizing committee are reportedly still in negotiations. Covid-19 headlines are likely to continue to sway markets throughout the week, and European markets will be watching the latest round of Brexit negotiations. We think gold is likely to test its 50d MA at $1,939/oz later today.