Commodities Daily - October 21, 2020

> Oil ticks higher ahead of EIA inventory report, with US stimulus talks still on the radar. We expect Brent to remain range-bound today within a $42.5-43.1/bbl technical range as we anticipate a mixed EIA report. Positive stock market momentum could further strengthen today amid renewed hopes for a new round of US stimulus. Should the two sides take another step closer to striking a deal, we think Brent could finally break above the $43.5/bbl mark that it failed to overcome twice last week and even set course for $45/bbl.> Gold lifts off from $1,900/oz level on US stimulus talks optimism as dollar weakens. Today, investors will eye US mortgage applications and the Fed Beige Book. The latter will shed light on the pace of deceleration in the US economic recovery. Following this morning's price increase and amid the latest progress toward a US stimulus deal, gold has now established a $1,915/oz technical support level and is now targeting resistance at $1,935/oz, with a potential break above opening the way toward the next resistance at $1,967/oz.OIL TICKS HIGHER AHEAD OF EIA INVENTORY REPORT, WITH US STIMULUS TALKS STILL ON THE RADARBrent failed to break below $42.2/bbl on several occasions yesterday morning and rallied in early US trading before peaking at $43.3/bbl. It settled at $43.16/bbl, up $0.54/bbl on the day. One of the highlights of the day was a comment from Russian Energy Minister Alexander Novak after the JMMC video conference. Novak softened his stance on the prospect of lower for longer OPEC+ production, saying that it was too early to discuss the future of global oil production curbs beyond December, less than a week after asserting that plans to soften the output restrictions should proceed. Global risk appetite was boosted yesterday by US President Donald Trump signaling a willingness to agree to more than $2.2 trln in new Covid-19 relief measures, a figure Democrats have been pushing for months, with just two weeks to go until the US presidential election and despite opposition from within his own Republican Party.Overnight, the API reported a 0.584 mln bbl rise in US crude stocks last week to 490.6 mln bbl (the EIA's latest estimate was 489.1 mln bbl). The buildup came amid a 0.07 mln bpd rise in imports and a 0.197 mln bpd drop in refinery runs. Crude stocks at Cushing rose 1.2 mln bbl. The refined product data was more upbeat, showing a 1.6 mln bbl draw in gasoline stocks and a strong 6 mln bbl decrease in distillate stocks. The EIA inventory report is due today at 17:30 Moscow time. The Bloomberg consensus is for a 1.37 mln bbl crude stock draw, a 1.5 mln bbl decline in gasoline stocks and a 2 mln bbl draw in distillate stocks. We anticipate the EIA data will show a 1 mln bbl increase in US crude inventories, with lower refinery runs and higher imports slightly offsetting the subdued production recovery in the aftermath of Hurricane Delta as platforms gradually returned to operation following closures in the Gulf of Mexico during the reporting week. We expect support to come from upbeat refined products data, as the API's release strongly suggested. We think Brent will remain range-bound today within a $42.5-43.1/bbl technical range as we anticipate a mixed EIA report. Positive stock market momentum could further strengthen today amid renewed hopes for a new round of US stimulus. Should the two sides take another step closer to striking a deal, we think Brent could finally break above the $43.5/bbl mark that it failed to overcome twice last week and even set course for $45/bbl.GOLD LIFTS OFF FROM $1,900/OZ LEVEL ON US STIMULUS TALKS OPTIMISM AS DOLLAR WEAKENSDuring the first half of the day yesterday gold continued to hover above the $1,900/oz level before starting to generate positive momentum in the early US trading hours. This has followed though to this morning, as bullion is knocking on the door of the $1,920/oz mark as we write. This positive price action comes amid ongoing dollar weakening (EUR/USD has surged from 1.17 to 1.186 in just two days). The US stimulus negotiations remain the biggest story in global markets and are key behind recent price moves. Although no deal was approved yesterday, which was the deadline previously set by House Speaker Nancy Pelosi, the negotiators have been sounding an optimistic note, which buoyed markets. Pelosi has now said that she hoped a deal would be reached this week, which would allow it to be passed before the presidential election on November 3. This and the fact that US President Donald Trump signaled a willingness to go along with more than $2.2 trln in new relief, a figure that Democrats have been pushing for months, have buoyed markets. Although Pelosi yesterday remarked that a deal may yet come this week, newswires also reported claims that Senate Majority Leader Mitch McConnell said he will not support the current draft going back and forth between Pelosi and the White House. Furthermore, Covid-19 infections continue to rise in key regions and were acknowledged as a key risk by ECB President Christine Lagarde. Today, investors will eye US mortgage applications and the Fed Beige Book. The latter will shed light on the pace of deceleration in the US economic recovery. Uncertainty and volatility related to the pandemic, and its negative effect on consumer and business activity, has been an ongoing theme echoed across the country. Following this morning's price increase and amid the latest progress toward a US stimulus deal, gold has now established a $1,915/oz technical support level and is now targeting resistance at $1,935/oz, with a potential break above opening the way toward the next resistance at $1,967/oz.