Commodities Daily - October 8, 2020

> Oil stabilizes; attention on production disruptions in US, Norway. Today, investors will eye US weekly jobless claims and OPEC's annual World Oil Outlook, which will contain data and projections on the upstream and downstream, as well as market supply and demand, out to 2045. The focus for the market will remain Hurricane Delta and the oil workers' strike in Norway. Note that the latter now threatens to shut the North Sea's largest oilfield, Johan Sverdrup. In our view, the price risks today are skewed to the upside, with Brent to first test the $42.2/bbl technical resistance level, a break above that likely leading to a gain to $42.7/bbl.> Gold hovering below $1,900/oz on revived US stimulus hopes; US jobs data eyed. Today, gold investors will primarily eye the latest initial jobless claims update, which we think may skew lower for a second consecutive week, with continuing claims likely to fall at a faster pace as more unemployed Americans exhaust their 26 weeks of benefits. We think that as a result gold will finally manage to break above technical resistance of $1,896/oz, a move above which could lead to a gain to $1,910/oz.OIL STABILIZES; ATTENTION ON PRODUCTION DISRUPTIONS IN US, NORWAYYesterday, having traded early around the $42/bbl mark, front-month Brent slid toward $41.6/bbl ahead of the weekly EIA US inventory report, despite gains in S&P 500 futures and the weakening dollar. The EIA report ended up showing a 0.5 mln bbl increase in US crude oil stocks to 492.9 mln bbl last week - this came amid a 0.85 mln bpd decrease in exports to 2.66 mln bpd, a 0.61 mln bpd increase in imports to 5.73 mln bpd and a 0.3 mln bpd rebound in production to 11 mln bpd (the first weekly increase in more than two months). However, we note that US crude oil production will fall next week, as Hurricane Delta is set to make its way through the Gulf of Mexico, which accounts for 17% of US crude output, in coming days. (The hurricane is forecast to intensify into a Category 3 storm, with oil producers evacuating 183 offshore facilities and halting nearly 1.5 mln bpd of oil output so far; several storms have hit the Gulf in recent months, but each only briefly dented output.) Yesterday's EIA report also showed a 0.18 mln bpd increase in refinery inputs to 13.85 mln bpd, which is insufficient to offset the overall buildup. Inventories at Cushing rose 0.47 mln bbl to 56.5 mln bbl. The refined product data was upbeat, with gasoline stocks falling 1.43 mln bbl to 226.7 mln bbl and distillate stocks easing 0.96 mln bbl to 171.8 mln bbl. Overall, total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 1.98 mln bbl, with small draws across all refined product categories besides fuel oil, inventories of which registered a slight build. We highlight that gasoline stockpiles are now below their five-year average for the first time since March, pointing to a rebound in driving and subdued production at refineries. Inventory levels for the rest of the refined products are, however, still well above seasonal norms. Following the EIA report release, Brent dipped to an intraday low of $41.36/bbl, as the crude oil stock build fell short of expectations for a 1.2 mln bpd draw. Later in the day, oil prices managed to pare losses, rebounding to $42/bbl. Brent eventually settled at $41.99/bbl, fixing $0.66/bbl below the previous settlement.Today, investors will eye US weekly jobless claims and OPEC's annual World Oil Outlook, which will contain data and projections on the upstream and downstream, as well as market supply and demand, out to 2045. The focus for the market will remain Hurricane Delta and the oil workers' strike in Norway. Note that the latter now threatens to shut the North Sea's largest oilfield, Johan Sverdrup, with production capacity of 0.47 mln bpd. Should the field close, the existing oil and gas production outage would nearly triple to around 0.934 mboepd. Equinor, the operator of Johan Sverdrup, said in a statement yesterday that "there would not be sufficient capacity and competence in key operational functions" at the field after October 14, when a rotation of personnel is scheduled. In our view, the price risks today are skewed to the upside, with Brent to first test the $42.2/bbl technical resistance level, a break above that likely leading to a gain to $42.7/bbl.GOLD HOVERING BELOW $1,900/OZ ON REVIVED US STIMULUS HOPES; US JOBS DATA EYEDAfter briefly sliding to $1,873/oz at the start of the day yesterday, gold began to pare back losses and surged toward $1,900/oz. However, it was unable to break above the $1,896/oz technical resistance level that we outlined yesterday and ended up consolidating within the $1,880-1,890/oz range for the rest of the day. Yesterday, investors were weighing signs that Democratic presidential nominee Joe Biden's chances of taking the presidency were looking brighter and what that could mean for passing a new stimulus bill. We would add that yesterday's US vice presidential debate may have also helped Biden. Note that Democrats have always been willing to pass a vast fiscal stimulus package, while Republicans have been proposing a more conservative package. A fresh round of state polls released yesterday showed Biden is widening his lead against Trump in a slew of crucial battleground states. Meanwhile, the minutes of the September 15-16 FOMC meeting released yesterday showed that some Fed officials sought further debate on the future of the asset-purchase program, signaling they'd be open to increasing bond-buying going forward, which would be gold-price supportive.This morning, gold is yet again targeting the $1,900/oz mark amid a sudden reversal in Trump's position on stimulus negotiations. Investors are now repricing the possibility that new US fiscal outlays may yet reach the market in the coming weeks. After initially shutting down negotiations over a new stimulus deal on Tuesday, Trump later tweeted that Congress should pass stimulus for airlines, small businesses, as well as provide stimulus checks of $1,200 for individuals. Today, gold investors will primarily eye the latest initial jobless claims update, which we think may skew lower for a second consecutive week, with continuing claims likely to fall at a faster pace as more unemployed Americans exhaust their 26 weeks of benefits. We think that as a result gold will finally manage to break above technical resistance of $1,896/oz, a move above which could lead to a gain to $1,910/oz.