Commodities Daily - September 1, 2020

> Oil slides ahead of US manufacturing PMI data, OPEC production estimates for August. Today, oil investors will primarily eye the US ISM manufacturing PMI data for August and the first estimates of OPEC production in August by Bloomberg and Reuters. We think the former may retreat off of last month's strong print. OPEC production estimates for August, meanwhile, could confirm the latest market speculation that UAE's undercompliance of its OPEC+ deal quota is increasing. This would provide additional headwinds to oil. Given that, we see a possibility of Brent testing and even breaking below $45.1/bbl technical support today, which could open the way to the next support level at $44.6/bbl. However, if the manufacturing PMIs surprise to the upside, Brent could well push higher to the technical range of $45.8-46.1/bbl.> Gold resumes its advance amid weak dollar. Gold neared $1,990/oz this morning and is consolidating in the $1,975-2,000/oz range as we write. Yesterday, the Fed's vice chairman, Richard Clarida, expressed doubts about negative interest rates and yield curve control as monetary policy tools. Today, the market will be eyeing manufacturing PMIs for August in Europe and the US. Should the dollar recover from yesterday's levels, we would expect gold to continue trading sideways below the $2,000/oz mark.OIL SLIDES AHEAD OF US MANUFACTURING PMI DATA, OPEC PRODUCTION ESTIMATES FOR AUGUSTAfter gaining almost $0.7/bbl to $46.5/bbl during the first half of the day yesterday, front-month Brent began to slide, falling to as low as $45.20/bbl. It eventually settled at $45.28/bbl, fixing $0.53/bbl below the previous settlement. One of the notable highlights of the day that weighed on oil prices was a statement by Democratic presidential candidate Joe Biden that he would not ban hydraulic fracturing if elected, calling Republican assertions that he supports such a ban a lie. Another factor providing headwinds was the release of the EIA 914 report that showed US crude oil production rising to 10.43 mln bpd in June from 10 mln bpd in May, although this was well below the 10.9 mln bpd figure in June that is derived by averaging US oil production data from the weekly EIA inventory reports.This morning, Brent is trending back toward the $46/bbl mark amid an upbeat Caixin Chinese manufacturing PMI for August that showed factory activity rising for the fourth consecutive month (to 53.1 from 52.8 in July). Today, oil investors will primarily eye the US ISM manufacturing PMI data for August and the first estimates of OPEC production in August by Bloomberg and Reuters. We think the former may retreat off of last month's strong 54.2 showing (the consensus is 54.7). A weaker print could provide slight headwinds to oil prices. Ahead of today's ISM data, it is important to highlight that the Covid-19 crisis significantly reshaped the composition of demand for manufactured products, boosting it for chemical, and computer and electronic products, while decimating it for transportation equipment.OPEC production estimates for August, meanwhile, could confirm the latest market speculation that UAE's undercompliance of its OPEC+ deal quota is increasing. This would provide additional headwinds to oil. Energy Aspects recently noted that compliance with the OPEC+ deal slipped to 87% in July, partly due to the UAE (only 61% compliance), which may continue to overproduce in the months ahead, thus undermining Saudi Arabia's efforts to improve compliance by Iraq and Nigeria. Note that yesterday Reuters, citing two sources with direct knowledge of the matter, reported that Abu Dhabi National Oil Company will reduce the volume of crude oil it supplies to Asian term buyers by 30% in October as part of its commitment to the OPEC+ deal.Given the price risks outlined above, we see a possibility of Brent testing and even breaking below $45.1/bbl technical support today, which could open the way to the next support level at $44.6/bbl. However, if the manufacturing PMIs surprise to the upside, Brent could well push higher to the technical range of $45.8-46.1/ LD RESUMES ITS ADVANCE AMID WEAK DOLLARYesterday, the market's focus was trained on comments from Fed officials. Fed Vice Chairman Richard Clarida gave a blunt confirmation that interest rates will likely remain low for a long time. He also expressed doubts about negative interest rates and yield curve control as monetary policy tools. Moreover, he said that even if unemployment declines, the Fed will be in no hurry to raise rates. Clarida's comments were welcomed by gold investors, and bullion began to climb during US trading hours, peaking at $1,974/oz. This was accompanied by dollar weakening, likely caused by portfolio rebalancing on the last day of the month.Gold resumed its advance this morning and is consolidating in the $1,975-2,000/oz range as we write. The most important data for the market today will be manufacturing PMIs for August in Europe and the US, which could provide a temporary boost to the dollar. We therefore believe that the upside for gold today will be limited, so we see it trading sideways below the $2,000/oz