Commodities Daily - September 2, 2020

> Oil trades sideways ahead of likely upbeat EIA inventory report. In the run-up to the EIA inventory report later today, investors will be digesting the US ADP employment report for August, which we think is likely to show a modest m-o-m gain in hiring in light of Friday's headline nonfarm payrolls report. In the EIA inventory report, we expect a crude oil stock draw of around 4 mln bbl and solid drawdowns for both gasoline and diesel. Hurricane disruptions will certainly impact this report, which covers the week to August 28, so surprises could be in store. We assume the net result will be yet another weekly decline in total US oil and refined product stockpiles, which would support prices. We therefore see a high chance of Brent breaking above technical resistance at $46.1/bbl following the EIA numbers and pushing toward the next resistance at $47.1/bbl.> Gold prices stable amid strong US macro data. Yesterday saw the publication of a strong batch of manufacturing data from across the globe. This included the US ISM manufacturing index, which rose to 56.0 in August, its highest level since December 2018, thanks mainly to a very strong reading of the new orders subindex. The dollar strengthened in response, which resulted in gold finishing the day only 0.1% higher at close to $1,970/oz. Today, attention will be focused on a raft of US data, including ADP employment data, mortgage approvals, the Fed's Beige Book and durable goods orders.OIL TRADES SIDEWAYS AHEAD OF LIKELY UPBEAT EIA INVENTORY REPORTBrent added almost $0.6/bbl yesterday morning to reach $46.2/bbl before retreating to $45.6/bbl and eventually settling at $45.58/bbl, $0.3/bbl above the previous settlement. Major support came from upbeat US ISM manufacturing PMI data for August, which rose from 54.2 in July to 56.0, the highest level since January 2019, and marking three straight months of growth. Also in focus were estimates by Bloomberg and Reuters for OPEC crude oil production in August (up a respective 0.55 mln bpd m-o-m to 23.94 mln bpd and 0.95 mln bpd to 24.27 mln bpd). The group was permitted to add more than 1.2 mln bpd during the month, as OPEC+ has begun tapering its output cuts amid expectations of a gradual recovery in demand. The second biggest rise came from the UAE, which pumped more than its quota. The UAE energy minister attributed this to the need to meet the peak of domestic summer electricity demand. Russian oil production reached 9.86 mln bpd in August, up from 9.37 mln bpd in July.Overnight, the API reported that US crude stocks fell 6.4 mln bbl to 501.2 mln bbl last week (versus the EIA's latest figure of 507.7 mln bbl). The draw came amid a 0.8 mln bpd decline in imports and despite a similar 0.8 mln bpd drop in refinery runs. Crude stocks at Cushing fell by 0.23 mln bbl. Producers are restarting activity in the aftermath of Hurricane Laura, with 0.52 mln bpd (28.4%) of offshore oil output remaining shut as of yesterday in the US Gulf of Mexico, according to the US Department of Interior. The refined product data was also upbeat, showing a strong 5.8 mln bbl draw in gasoline stocks and a 1.4 mln bbl increase in distillate inventories. Investors are now positioning for the EIA inventory report today at 17:30 Moscow time. The Bloomberg consensus is calling for a 2 mln bbl crude stock draw, a 3 mln bbl decrease in gasoline inventories and a 1 mln bbl decline in distillate stocks. In the run-up to the EIA inventory report, investors will be digesting the US ADP employment report for August, which we think is likely to show a modest m-o-m gain in hiring in light of Friday's headline nonfarm payrolls report. In the EIA inventory report, we expect a crude oil stock draw of around 4 mln bbl and solid drawdowns for both gasoline and diesel. Hurricane disruptions will certainly impact this report, which covers the week to August 28, so surprises could be in store. We assume the net result will be yet another weekly decline in total US oil and refined product stockpiles, which would support prices. We therefore see a high chance of Brent breaking above technical resistance at $46.1/bbl following the EIA numbers. We think that further bullish EIA reports in the coming weeks coupled with the recent flurry of upbeat US economic data (with more likely to come) are building a strong case for Brent returning to the $50/bbl mark in LD PRICES STABLE AMID STRONG US MACRO DATAYesterday saw the publication of manufacturing data across the globe, with ISM's US manufacturing gauge coming out at 17:00 Moscow time. Gold, which had been trading around $1,990/oz early in the day, retreated to around $1,970/oz after the ISM gauge printed at 56.0 in August (above the consensus estimate of 54.8), pointing to a quick recovery in the US economy amid the ease in lockdown measures. The new orders component was particularly strong at 67.6 (versus the consensus of 58.8).Yesterday also saw market-moving comments from the US Treasury and the Fed. Treasury Secretary Steven Mnuchin said that the US was in urgent need of the new fiscal stimulus package that US lawmakers have long been unable to agree upon. Fed Governor Lael Brainard also called for additional fiscal stimulus and indicated that the Fed should pivot to an even more aggressive strategy to support the economy, perhaps by ramping up its bond purchases. While this type of rhetoric bodes well for gold, we would likely need to see more concrete steps taken for gold prices to start responding. Today, attention will be focused on a raft of US data, including ADP employment data, mortgage approvals, the Fed's Beige Book and durable goods orders. We think gold may well trade in a narrow range around the $1,975/oz mark until Friday's monthly US jobs