Commodities Daily - September 3, 2020

> Oil prices fall on stronger dollar despite upbeat EIA inventory report; eurozone and US economic data in focus. Today, investors will primarily eye eurozone retail sales data, US initial jobless claims and ISM Services PMI data for August. Although jobless claims remain stubbornly elevated five months into the pandemic, with new virus cases trending lower employment should continue to rebound. Significant downside risks persist, however. As for the ISM services data, we think that it is likely to moderate following a stronger than expected bounce in July, with the uptick in July reflecting an initial recovery rather than a sustainable rebound. In our view, if today's US data fails to surprise to the upside, it would derail the current dollar advance that heavily pressured Brent prices yesterday. Therefore, in our view, Brent is most likely to push higher to $45.1/bbl technical resistance, as it seems to have found support around $44.3/bbl. A break above $45.1/bbl could lead to a gain to $45.9/bbl, while a break below $44.3 may cause a fall to $42.9/bbl.> Dollar strength puts gold under pressure. Gold ended yesterday at $1,943/oz and has retreated to $1,930/oz today. Although the US ADP employment report came in below consensus and Fed officials produced dovish comments, investors are now looking to fix profits in gold and moving into the dollar and risk assets. Today, several countries will release PMIs (overall and for services). In the US, the weekly jobless claims report and trade balance data will be published, while Chicago Fed President Charles Evans is due to give a speech.OIL PRICES FALL ON STRONGER DOLLAR DESPITE UPBEAT EIA INVENTORY REPORT; EUROZONE AND US ECONOMIC DATA IN FOCUSAhead of yesterday's EIA report, Brent was trading near $45.3/bbl, having slid from $46/bbl earlier on a stronger US dollar amid positive US manufacturing data. Investors trimmed bets against the greenback and sold the euro on concerns that the ECB was worried about the strengthening of the latter. The EIA report showed a sixth consecutive weekly drop in US crude oil stocks of 9.36 mln bbl to 498.4 mln bbl with most of the data showing strong effects and disruptions caused by Hurricane Laura. The total crude oil drawdown came amid a strong 1.1 mln bpd decrease in crude oil production to 9.7 mln bpd, as Gulf Coast platforms were evacuated, and a 1 mln bpd drop in imports to 4.9 mln bpd as shipping flows were disrupted. A 0.84 mln bpd decrease in refinery inputs to 13.87 mln bpd (a few plants are still down to repair the damage from the hurricane) and 0.36 mln bpd decrease in exports - which were also disrupted - to 3 mln bpd, were insufficient to offset the overall inventory draw. Inventories at Cushing, the WTI delivery hub, were up by 0.11 mln bbl to 52.5 mln bbl.The refined product data was upbeat as well, showing gasoline stocks falling 4.32 mln bbl to 234.8 mln bbl and distillate stocks dropping by 1.67 mln bbl to 177.5 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell by a strong 7.75 mln bbl. Gasoline demand, meanwhile, fell 0.37 mln bpd to 8.8 mln bpd, losing some support because of the inclement weather along the Gulf Coast. Following the upbeat EIA report, Brent briefly spiked $0.4/bbl but then resumed its downturn on dollar strength. Another downbeat factor at play yesterday was the news that Iraq may seek a two-month extension to implement compensatory cuts under the OPEC+ output agreement. This points to the fact that Iraq is not able to curb production as quickly as previously promised. Brent eventually settled at $44.43/bbl, down $1.15/bbl on the day.Today, investors will primarily eye eurozone retail sales data, US initial jobless claims and ISM nonmanufacturing PMI data for August. Although jobless claims remain stubbornly elevated five months into the pandemic, with new virus cases trending lower employment should continue to rebound. Significant downside risks persist, however. As for the ISM services data, we think that it is likely to moderate following a stronger than expected bounce in July, with the uptick in July reflecting an initial recovery rather than a sustainable rebound. Also note that the services sector will remain difficult to restore to pre-crisis levels due to social distancing measures. In our view, if today's US data fails to surprise to the upside, it would derail the current dollar advance that heavily pressured Brent prices yesterday. Therefore, in our view, Brent is most likely to push higher to $45.1/bbl technical resistance, as it seems to have found support around $44.3/bbl. A break above $45.1/bbl could lead to a gain to $45.9/bbl, while a break below $44.3/bbl may cause a fall to $42.9/ LLAR STRENGTH PUTS GOLD UNDER PRESSUREGold came under pressure yesterday, despite weak US labor market data and dovish comments from Fed officials. US private payrolls rose by only 428k (below the consensus forecast of 1 mln), while the data for July was revised upward by 55k. Following the report, gold briefly gained $10/oz before sliding almost $30/oz into the close.Yesterday saw dovish talk from several Fed officials. New York Fed President John Williams confirmed that the Fed is seeking to stabilize the labor market and boost employment. He said achieving average inflation of 2% would help the economy, but the challenge is to sustain it and an overshoot of the 2% target is desirable now. Cleveland Fed President Loretta Mester described the recovery as fragile and said there was a need for additional fiscal support. However, these comments failed to constrain the firming dollar, which put pressure on gold.Gold has slipped to $1,930/oz as we write. Today, several countries will release PMIs (overall and for services). In the US, the weekly jobless claims report and trade balance data will be published, while Chicago Fed President Charles Evans is due to give a speech. Should the dollar strengthen further, we would expect gold to test technical support at $1,913/