Commodities Daily - October 19, 2020

> Oil prices hold steady ahead of OPEC+ JMMC meeting. The oil market will today primarily be eyeing the outcome to the OPEC+ joint ministerial committee meeting, particularly any comments or hints on whether the group might deviate from its current plan and refrain from raising production next year amid the slower expected demand recovery. Following today's disappointing 3Q20 GDP data out of China, we see downside potential for oil, especially as OPEC+ is unlikely to recommend a new supply strategy for now. We think Brent will retest the support zone at $42.5-42.6/bbl today, with a break below likely to cause it to drop into the $41.5-42.1/bbl range.> Gold prices hover above $1,900/oz level ahead of a busy week. This week, we think that gold is most likely to generate positive momentum. We believe that a break above $1,910/oz is most likely to open a path to $1,925/oz, although at this point we think the upside would be limited to that level. However, in the event of an abrupt bearish development, gold could break support at $1,896/oz and begin to target the $1,877/oz technical support level.OIL PRICES HOLD STEADY AHEAD OF THE OPEC+ JMMC MEETINGFront-month Brent slid $0.9/bbl to $42.3/bbl on Friday morning before clawing back most of those losses during US trading hours and recovering to the $43/bbl mark. It eventually settled at $42.93/bbl, down $0.23/bbl on the day. Oil price headwinds are coming from the unnerving spike in Covid-19 infections in the US and Europe (the world's biggest fuel-consuming regions), as well as the recent surge in the US active oil rig count. Baker Hughes on Friday reported the biggest weekly rise in US oil rigs since January (up 12 to 205, their highest level since June). Brent is hovering below the $43/bbl mark as we write and is holding up rather well in light of Chinese 3Q20 GDP data this morning, which undershot expectations (up 4.9% y-o-y and 2.7% Q-o-Q), underscoring concerns that the global surge in infections is impacting demand in the world's largest oil importer.The oil market will today primarily be eyeing the outcome to the OPEC+ joint ministerial committee meeting, particularly any comments or hints on whether the group might deviate from its current plan. Russian President Vladimir Putin and Saudi Arabia's Crown Prince Mohammed Bin Salman spoke Saturday in what the Kremlin described as a continuation of an October 13 conversation. In the follow-up statement, the Kremlin said the two had discussed OPEC+ cooperation "extensively" and that "both sides reiterated their readiness for further close coordination in this area in the interest of maintaining stability in the world energy market." These conversations came amid a surge in coronavirus cases in Europe and the Americas, which is weighing on the outlook for demand over the next few months. Oil traders are now questioning whether the market will be able to absorb OPEC+'s planned production increase of nearly 2 mln bpd in January, which could result in a global inventory buildup. Earlier last week, the Russian and UAE energy ministers said that for now, the group plans to proceed with the supply boost as scheduled. However, Bloomberg has cited one OPEC delegate as saying that a delay of two or three months is a "realistic" possibility. Much could change before the big OPEC+ meeting, which will take place November 30-December 1. Important factors that OPEC+ ministers will monitor before possibly altering supply policy include the November 3 US presidential election (which could reshape US foreign and energy policy, including Iranian oil sanctions), the pace of Libya's oil production recovery and the trajectory of the pandemic (and potential for a vaccine or treatment). Following today's disappointing Chinese 3Q20 GDP data, we see downside potential for oil, especially as OPEC+ is unlikely to recommend a new supply strategy for now. We think Brent will retest the support zone at $42.5-42.6/bbl today, with a break below likely to cause it to drop into the $41.5-42.1/bbl range.GOLD PRICES HOVER ABOVE $1,900/OZ LEVEL AHEAD OF A BUSY WEEKOn Friday, gold prices were trading within the $1,900-1,914/oz range. This came at the end of a week when gold was largely oscillating around the $1,900/oz mark amid twists and turns in the US stimulus negotiations between Republicans and Democrats. Meanwhile, despite the rising Covid-19 case numbers in both Europe and the US, sentiment in global markets was decent on Friday and remains so this morning. Today's release of the Chinese GDP slightly fell short of expectations, up 4.9% y-o-y versus the consensus of 5.5%. However, retail sales and industrial production for September beat expectations. US stimulus negotiations continue to be the most influential story for global sentiment. Chances of a new fiscal stimulus package to be approved in the US before the elections have risen slightly after US House Speaker Nancy Pelosi said on Sunday that she was optimistic legislation could be pushed through before Election Day. Also note that the UK and EU are showing signs of a willingness to compromise in order to reach a trade deal, which provides gold price supportive US dollar headwinds.The joint IMF and World Bank meetings continue through Thursday, with Fed Chairman Jerome Powell and IMF Managing Director Kristalina Georgieva scheduled to speak on a panel today. ECB President Christine Lagarde is due to deliver remarks at the ECB conference, and a wide range of other top DM and EM central bankers are also expected to speak. US housing starts and building permits top global macro releases. On Wednesday, investors will be digesting the Fed's Beige Book. The last debate of the US presidential candidates before the November 3 election is Thursday night. On Friday, investors will eye preliminary October PMIs by IHS Markit for the eurozone and US to see how well economies are performing in the face of surging coronavirus cases and the lack of further US fiscal stimulus. This week, we think that gold is most likely to generate positive momentum. We believe that a break above $1,910/oz would most likely open a path to $1,925/oz, although at this point we think the upside would be limited to that level. However, in the event of an abrupt bearish development, gold could break support at $1,896/oz and begin to target the $1,877/oz technical support level.