Commodities Daily - September 11, 2020

> Oil remains under pressure ahead of an eventful week. Today, investors will primarily focus on US CPI data for August and the Baker Hughes rig count ahead of a busy week next week that includes the monthly OPEC and IEA oil market reports as well as the OPEC+ JMMC meeting on Thursday to discuss output cuts. The Fed's new averaging approach to consumer prices has rendered the inflation data much less relevant in its list of policy concerns, so today's CPI release is unlikely to be a strong market-moving event. Last week's Baker Hughes data was downbeat, showing a rare increase in the US active rig count, and we expect it to provide a headwind later today as well. We expect Brent to remain under pressure today and ease to the $39.3-39.5/bbl technical support zone. The upside potential remains limited to $40.1/bbl, with a very optimistic scenario leading to a further gain to $40.7/bbl.> Gold reacts positively to ECB meeting. Gold firmed 0.8% yesterday to $1,947/oz, after peaking at $1,965/oz. In the US, uncertainty lingers over the adoption of a new fiscal package, as lawmakers have been unable to agree on the amount. Today should see further comments from ECB officials, the US CPI and the monthly Treasury statement.OIL REMAINS UNDER PRESSURE AHEAD OF AN EVENTFUL WEEKBrent was trading sideways at $40-41/bbl ahead of yesterday's EIA report, which indicated the first increase in US crude inventories following six weeks of draws. Crude stocks rose 2 mln bbl to 500.4 mln bbl. Most of the data still reflected the impact of disruptions caused by Hurricane Laura. The total crude oil build came amid a strong 1.01 mln bpd drop in refinery inputs to 12.78 mln bpd, with Gulf Coast refiners cutting back volumes due to Hurricane Laura. Weak refining margins and elevated distillate inventories are likely to keep overall capacity utilization low in the coming months. Also contributing to the overall oil inventory buildup was a 0.3 mln bpd increase in oil production to 10 mln bpd (as Gulf Coast producers resumed activity), a 0.52 mln bpd rise in imports to 5.4 mln bpd and a 0.06 mln bpd decline in exports to 2.9 mln bpd. Inventories at Cushing, the WTI delivery hub, were up 1.84 mln bbl to 54.35 mln bbl.By contrast, the refined product data was upbeat, with gasoline stocks falling 2.95 mln bbl to 231.9 mln bbl and distillate stocks dropping 1.67 mln bbl to 175.8 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 3.4 mln bbl. Gasoline stockpiles are slowly but surely moving closer to the five-year average range, but this is mostly a result of low refinery runs, as demand remains well below seasonal norms on a four-week rolling average. Jet fuel demand remains on a downward trend that began at the end of July. Oil prices had a subdued reaction to the release and moved lower later in the day along with the US stock market. The lack of catalysts underpinning Wednesday's rally appeared to be a factor leading some markets into reversals. Signals from the US Congress that no compromise will be reached on the next fiscal stimulus package in the foreseeable future also hit sentiment, as the US market in particular has grown accustomed to stimulus tailwinds. Brent eventually settled at $40.06/bbl, down $0.73/bbl on the day.Today, investors will primarily focus on US CPI data for August and the Baker Hughes rig count ahead of a busy week next week that includes the monthly OPEC and IEA oil market reports as well as the OPEC+ JMMC meeting on Thursday to discuss output cuts. With regard to today's US CPI, prices have been reversing the pandemic-induced plunge, with the CPI posting a 0.6% gain in June and July, and the consensus is calling for a 0.3% increase in August. This would effectively represent a return to normal price levels rather than an increase in underlying inflation. However, the Fed's new averaging approach to consumer prices has rendered the inflation data much less relevant in its list of policy concerns, so today's CPI release is unlikely to be a strong market-moving event. Last week's Baker Hughes data was downbeat, showing a rare increase in the US active rig count, and we expect it to provide a headwind later today as well. We expect Brent to remain under pressure today and ease to the $39.3-39.5/bbl technical support zone. The upside potential remains limited to $40.1/bbl, with a very optimistic scenario leading to a further gain to $40.7/ LD REACTS POSITIVELY TO ECB MEETINGYesterday's main events took place on the FX market, where the euro began to firm after the ECB meeting, which boosted gold in dollar terms. Gold opened the day at around $1,940/oz but jumped to $1,965/oz upon the opening in New York, and it closed up 0.8% on the day. The ECB left rates on hold and kept its QE program at EUR1.35 trln until June 2021. ECB President Christine Lagarde said the meeting had addressed the euro exchange rate but she stressed that the bank has an inflation mandate. She noted that deflationary risks have been gradually fading since June. The bank maintained its inflation forecast of 0.3% for 2020 but raised its forecast for 2021 from 0.8% to 1%, while the forecast for 2022 was left at 1.3%. Lagarde's comments had a neutral impact on ETF gold purchases. Although they picked up another 21.4 koz yesterday, this was insignificant in terms of the overall holdings, which remain at 109.7 moz.Today should see further comments from ECB officials, the US CPI and the monthly Treasury statement. Uncertainty lingers over the market, particularly with regard to the adoption of a new fiscal package in the US, as Democrats and Republicans appear unlikely to agree on a new stimulus package (they discussed a $300 bln package yesterday). In addition, Brexit talks are continuing. We expect gold to stick around the $1,950/oz mark ahead of the US FOMC meeting next Tuesday and