Commodities Daily - October 9, 2020

> Oil keeps trending higher with focus remaining on production disruptions in US and Norway. There are no major economic data releases scheduled for today. Oil investors are eying the Baker Hughes active rig count and are also tracking Hurricane Delta (expected to hit Louisiana today; has already forced shut 1.7 mln bpd of US Gulf Coast oil output) and the oil workers strike in Norway (a meeting between oil companies and labor representatives with a state-appointed mediator is scheduled for today; the strike threatens around 25% of the country's oil and gas output). In our view, the price risks remain skewed to the upside today, with Brent likely revisiting its September 18 high of $43.8/bbl.> Gold jumps as US administration reverses course on comprehensive stimulus package. This morning gold has surged to $1,910/oz, after the US administration completely reversed course and is now in favor of a comprehensive stimulus package. US Treasury Secretary Steven Mnuchin has told his negotiating counterpart Nancy Pelosi that the Trump administration is open to a comprehensive fiscal stimulus package in the near future. We note that despite the bullish turn on stimulus, no agreement has yet been reached, and there is plenty of scope for volatility from the twists and turns in US politics. In our view, the sharp reversal already seen so far today in gold toward technical resistance at $1,910/oz is likely to extend $1,925/oz later today.OIL KEEPS TRENDING HIGHER WITH FOCUS REMAINING ON PRODUCTION DISRUPTIONS IN US AND NORWAYHaving hovered above the $42/bbl mark during Asian trading yesterday, front-month Brent then began to rise, nearly reaching $43.5/bbl later in the day. It eventually settled at $43.34/bbl, fixing $1.35/bbl above the previous settlement. A leading price-supportive factor was a Dow Jones report that Saudi Arabia is considering opposing OPEC's planned production increase early next year. We note that this comes amid Libya's recent production increase. The Dow Jones report spurred the Brent curve's contango to narrow, with the 3m calendar spread now near $1/bbl, compared with $1.4/bbl on October 2 - this indicates that while there is still concern about oversupply in the market, it has eased to some extent.OPEC yesterday released its annual World Oil Outlook report, which covered the period 2019-45, with investors focusing on the long-term demand forecasts. OPEC sees oil demand rising to 107.2 ml bpd in 2030 (1.1 mln bpd below its 2030 forecast given last year and over 10 mln bpd below its 2030 forecast given back in 2007) from 90.7 mln bpd in 2020 (in 2019 demand was close to 100 mln bpd). In the late 2030s, demand is expected to plateau and could by then have even begun to decline. In the shorter term, it is expected to rebound to 97.7 mln bpd next year, 99.8 mln bpd in 2022 (slightly above the 2019 level) and 102.6 mln bpd by 2024. Also important to highlight is that OPEC now expects to emerge from the pandemic with a greater share of global oil sales, while previously it had forecast losing market share until the middle of the decade.There are no major economic data releases scheduled for today. Oil investors are eying the Baker Hughes active rig count and are also tracking Hurricane Delta (expected to hit Louisiana today and has already forced shut 1.7 mln bpd of US Gulf Coast oil output) and the oil workers' strike in Norway (a meeting between oil companies and labor representatives with a state-appointed mediator is scheduled for today; the strike threatens around 25% of the country's oil and gas output). In our view, the price risks remain skewed to the upside today, with Brent likely revisiting its September 18 high of $43.8/bbl.GOLD JUMPS AS US ADMINISTRATION REVERSES COURSE ON COMPREHENSIVE STIMULUS PACKAGEAfter gaining around $15/oz during the first half of the day yesterday, gold fell just short of breaking above the $1,900/oz mark early in US trading hours. Later on during the Wall Street session it began to give back earlier gains, which was partially attributable to a disappointing US initial jobless claims report that showed claims slightly down w-o-w but still stubbornly high, suggesting that the labor market recovery could be stalling. This pushed investors into the dollar, thus pressuring gold prices. This morning, however, gold has surged to $1,910/oz, after the US administration completely reversed course and is now in favor of a comprehensive stimulus package. US Treasury Secretary Steven Mnuchin has told his negotiating counterpart, Democratic House Speaker Nancy Pelosi, that the Trump administration is open to a comprehensive fiscal stimulus package in the near future. This comes only two days after the US president canceled all negotiations on the Republican side and one day after he signaled a willingness to negotiate a series of piecemeal stimulus bills rather than a comprehensive package. We note that despite the bullish turn on stimulus, no agreement has yet been reached, and there is plenty of scope for volatility from the twists and turns in US politics. For markets, this highlights again that the next few weeks will likely see volatility and reversals driven by US politics. This morning, meanwhile, hopes of more US fiscal largesse set a bullish gold price outlook. In our view, the sharp reversal already seen so far today in gold toward technical resistance at $1,910/oz is likely to extend $1,925/oz later today. Note, however, that one positive factor for the dollar today, which could provide headwinds for gold, is news that the US government is blocking access from Hong Kong to a range of federal data, including data relevant to the finance industry.