Commodities Daily - October 26, 2020

> Oil tumbles on surging coronavirus cases, fast rising Libyan supply amid a lack of US stimulus breakthrough. We think all of the bearish factors currently in play will continue to weigh on sentiment and that Brent will likely remain under pressure today, first testing the closest support at $40.95/bbl, with a break below that most likely leading to a drop to $40.5/bbl. The main focus today will be on speeches by the Saudi energy minister and OPEC secretary general, who may hint at maintaining current production cuts for some period of 2021 amid the raging coronavirus and fast rising Libyan supply, thus delaying the current plan to raise production. > Gold under pressure as US stimulus prospects fade, while coronavirus situation deteriorates in US and Europe. Data wise, the market will today be primarily focused on the Chicago Fed national activity index and US new home sales, both for September. Ahead of the US elections and with the coronavirus rampaging across the US and Europe, we think gold is set to experience headwinds this week and will likely first head toward technical support at $1,887/oz, with a break below causing a retreat to $1,872/oz.OIL TUMBLES ON SURGING CORONAVIRUS CASES, FAST RISING LIBYAN SUPPLY AMID A LACK OF US STIMULUS BREAKTHROUGHAfter trading around the $42.5/bbl mark during the first half of the day on Friday, front-month Brent began to slide toward $41.5/bbl during US trading. It eventually settled at $41.77/bbl, fixing $0.69/bbl below the previous settlement. Preliminary IHS eurozone Markit PMIs for October released on Friday showed that the service sector continues to struggle amid coronavirus restrictions (the PMI came in at 46.2), whereas the manufacturing data from Europe was rather upbeat at 54.4, as orders surged amid rising global demand. The composite PMI came in at 49.4. Meanwhile, a brighter picture was seen in the US: the manufacturing PMI edged up to 53.3, while for services it jumped to 56 and the composite PMI at 55.5. Later in the day, however, the negative coronavirus dynamic in the US (Friday and Saturday saw the highest number yet of new coronavirus infections over a two-day period) and Europe (new cases in France hit a record of more than 50,000 on Sunday, Italy approved a partial lockdown, while Spain announced a state of emergency) derailed positive sentiment. Furthermore, US Democrats and Republicans accused each other of "moving the goalposts" in interviews on CNN as hopes for a deal before the election appear to be fading.Today, oil investors will be following the CERAWeek forum. Today's speakers include the Saudi energy minister, OPEC secretary general, Indian oil minister, as well as the CEOs of BP and Total. The main focus will be on whether OPEC officials will hint at maintaining the current production cuts for some period of 2021 amid the raging coronavirus and fast rising Libyan supply, thus delaying the current plan to raise production. Meanwhile, China's policy plenum has begun today in Beijing and runs through Thursday. Top officials will chart the country's economic course for 2021-25, seeking to avoid stagnation amid an uncertain global outlook and deepening tensions with the US. In terms of macro data today, investors will primarily focus on the Chicago Fed national activity index and US new home sales, both for September. We think all of the aforementioned bearish factors currently in play will continue to weigh on sentiment and that Brent will likely remain under pressure today, first testing the closest support at $40.95/bbl, with a break below that most likely leading to a drop to $40.5/bbl. This week, traders will be positioning ahead of the US presidential election and in light of the resurgence of the pandemic. Record daily cases in many nations are eliciting fresh curbs on economic activity. In terms of data relevant to the oil market, apart from the weekly US oil and refined products inventory update investors will also eye this Friday's EIA release of the 914 production report, which will reveal actual US oil production for August. Also, BP reports quarterly earnings on Tuesday, followed by Shell on Thursday and Exxon on Friday. All three are expected to post losses as refining margins and trading are under severe pressure this year.GOLD UNDER PRESSURE AS US STIMULUS PROSPECTS FADE, WHILE CORONAVIRUS SITUATION DETERIORATES IN US AND EUROPEGold advanced $12/oz to $1,914/oz on Friday morning following a rather upbeat preliminary eurozone PMI reading for October that pressured the dollar (EUR/USD climbing from 1.179 to 1.186). It later slid back to $1,900/oz, where it was trading for most of last week, amid negative coronavirus developments in the US (which reported its highest number of new infections in the two days through Saturday) and Europe (where France's new cases hit a record of more than 50,000 on Sunday, Italy approved a partial lockdown while Spain announced a state of emergency). US Democrats and Republicans accused each other of moving the goalposts as hopes for a deal before the presidential election remained elusive, with the Republican-led Senate unlikely to act before the election. A glimmer of hope does remain, however, as House Speaker Nancy Pelosi said the chamber could pass a plan this week.Data wise, the market will today be primarily focused on the Chicago Fed national activity index and US new home sales, both for September. Chinese industrial profits and US housing prices and consumer confidence are among tomorrow's top items. The gold market will this week be following the final few days of the US presidential campaign, while BoJ and ECB rate decisions will be in focus on Thursday, as well as US GDP and jobless claims. Friday's schedule is full of GDP releases from around the globe, as well as US personal spending. Ahead of the US elections and with the coronavirus rampaging across the US and Europe, we think gold is set to experience headwinds this week and will likely first head toward technical support at $1,887/oz, with a break below causing a retreat to $1,872/oz.