Commodities Daily - October 14, 2020

> Oil prices up ahead of IEA monthly oil market report, US inventory data releases. Today, oil investors will be following comments from the second day of the virtual Energy Intelligence Forum. Today's speakers include the CEOs of Total and Shell. Eyes will also be on the IEA monthly report and API inventories, with the latter expected to show draws in all categories. For the former, the risks are skewed to the downside, with an upbeat revision to this and next year's demand estimates regarded as very unlikely given the fundamental backdrop. In light of this, we think that Brent is more likely to test its 200-day moving average of $42/bbl today than to rise toward its 50-day moving average of $43/bbl.> Gold prices tumble as multiple factors boost dollar. Fresh financials from Bank of America, Goldman Sachs and Wells Fargo will be released and scrutinized today, following mixed numbers from companies that reported yesterday. In our view, today's results are likely to be strong, which could buoy markets that are currently somewhat downbeat, helping gold to start pare back yesterday's losses. We think it could first break above the 20-day moving average of $1,899/oz and then possibly even rise toward yesterday's high of $1,925/oz.OIL PRICES UP AHEAD OF IEA MONTHLY OIL MARKET REPORT, US INVENTORY DATA RELEASESDuring the first half of the day yesterday, front-month Brent gained $0.9/bbl amid upbeat September crude oil import data from China. It was trading near $42.6/bbl ahead of the release of the monthly OPEC report but afterwards slipped toward the $42/bbl mark, as the cartel made a number of downbeat revisions to its market outlook. Its global oil demand estimate was left almost unchanged for this year, but for next year was revised lower by 0.08 mln bpd. It now expects demand to average 90.29 mln bpd in 2020 and 96.84 mln bpd in 2021. The group also raised its projections for non-OPEC production for this year, mostly due to the stronger outlook in the US. The demand forecast for OPEC crude for this year was lowered by 0.32 mln bpd and was unchanged for next year at 27.92 mln bpd. Note that the UAE energy minister yesterday said that OPEC+ will stick to its plans to taper oil production cuts starting in January (which investors currently doubt amid the weaker than previously projected demand recovery). This is a topic that was likely discussed yesterday during the phone conversation between Russian President Vladimir Putin and Saudi Crown Prince Mohammed bin Salman.During yesterday's Wall Street session, the EIA drilling productivity report provided some support for oil. The agency expects US tight oil output to drop 0.123 mln bpd m-o-m to 7.69 mln bpd in November. This would be the biggest decline since May, according to revised data from the agency. Note that overall output is expected to fall for the third straight month and is expected to decline in most of the seven major shale formations in November. Brent eventually settled at $42.45/bbl, fixing $0.73/bbl above the previous settlement. This morning, oil is under pressure following the tightening of social restrictions in Britain and the Czech Republic to battle rising cases of Covid-19, while the French prime minister said he could not rule out local lockdowns. Also important to highlight is that the IEA, which advises Western governments on energy policy, under its base case of the annual World Energy Outlook scenario sees a vaccine and therapeutics helping the global economy to rebound in 2021, while energy demand is seen fully recovering by 2023.Today, oil investors will be following comments from the second day of the virtual Energy Intelligence Forum. Today's speakers include the CEOs of Total and Shell. Eyes will also be on the IEA monthly report and API inventories, with the latter to be released overnight and expected to show draws in all categories. For the former, the risks are skewed to the downside, with an upbeat revision to this and next year's demand estimates regarded as very unlikely given the fundamental backdrop. In light of this, we think that Brent is more likely to test its 200-day moving average of $42/bbl today than to rise toward its 50-day moving average of $43/bbl.GOLD PRICES TUMBLE AS MULTIPLE FACTORS BOOST DOLLARAfter hovering above $1,920/oz midday yesterday, gold prices began to slide. It plummeted all the way to $1,890/oz after the latest reversal in the US stimulus negotiations. The US president, House speaker and Senate majority leader blamed one another for the latest impasse yesterday in remarks to journalists and on social media, which supported the dollar, pushing EUR/USD down from 1.180 to 1.173. Also weighing on markets were pauses in trials of two Covid-19 vaccine candidates from multinational pharmaceutical companies following indications of possible side effects. Brexit concerns provided additional support to the dollar. UK and EU officials accused each other of refusing to compromise and made little apparent progress toward a trade accord ahead of a key deadline this week. As discussions between UK and EU officials continue in Brussels, both sides agree that time is running out, and they still differ on who needs to make the first concessions on fisheries, state aid and how any agreement will be enforced, the three major obstacles to an accord.Today, investors await remarks from IMF Managing Director Kristalina Georgieva and World Bank President David Malpass amid the ongoing IMF/World Bank meetings, while a list of Fed, ECB and BoE executives are also speaking at other events. A G20 finance ministers and central bank governors meeting will take place in connection with the IMF/WB event. Eurozone industrial production and US PPI data and mortgage applications are among the macro releases due. Fresh financials from Bank of America, Goldman Sachs and Wells Fargo will be released and scrutinized today, following mixed numbers from companies that reported yesterday. In our view, today's results are likely to be strong, which could buoy markets that are currently somewhat downbeat, helping gold to start pare back yesterday's losses. We think it could first break above the 20-day moving average of $1,899/oz and then possibly even rise toward yesterday's high of $1,925/oz.