Commodities Daily - April 27, 2021

> Oil rebounds on OPEC+ demand optimism, but gains curbed by Covid-19 flare-up in India. Brent is hovering above $66/bbl as we write with the market today eyeing US consumer confidence for April, weekly API data on US oil and refined product inventories (to be released overnight) and quarterly earnings from BP. Despite positive momentum later yesterday, the headwinds for Brent remain strong, and we think it is set to retest support at $64.6/bbl today, with a break below taking it down to $62.9-63.9/bbl. We see a break above $66.5/bbl resistance toward the $67.1-68.1/bbl range as unlikely.> Gold steady ahead of Fed decision. Gold is trading at $1,780/oz as we write. The key data releases to look out for today are US home prices for February and US consumer confidence for April. We expect gold to trade sideways in the $1,755-1,785/oz range today.> Base and platinum group metal prices on the rise, as are prices for steel products and iron ore. Forward contracts on the LME closed higher yesterday. Aluminum rose 1.6% to $2,404/tonne, copper 2.1% to $9,751/tonne, nickel 1.7% to $16,666/tonne and zinc 2.2% to $2,915/tonne. Meanwhile, platinum rose 1.2% to $1,246/oz and palladium gained 2.3% to $2,927/oz. In the steel product and iron ore markets, prices have been on the rise, with global iron ore having risen since Friday by 2.4% to $180/tonne.OIL REBOUNDS ON OPEC+ DEMAND OPTIMISM, BUT GAINS CURBED BY COVID-19 FLARE-UP IN INDIABrent started the week near $66/bbl yesterday but dipped to as low as $64.6/bbl just ahead of the US trading session. Major pressure came from the Covid-19 flare-up in India, which has now ordered its army to help tackle the surge in new infections. Indian refiners are still actively buying June arrival crudes, so reduced domestic demand will first lead to higher refined product exports and then to a decrease in refinery runs. We estimate that Indian demand is set to fall by around 0.6 mln bpd m-o-m in April and is very unlikely to recover m-o-m in May. The global oil demand recovery is generally uneven, and we believe the surge in Indian cases serves as a timely reminder that any rally to $70/bbl would be premature at this stage. We think this might occur no earlier than in 3Q21, when demand should improve materially and the destocking of last year's surplus appears set to end. The demand recovery in the OECD is outstripping expectations and is a major factor shaping the upbeat outlook for 3Q21 despite the recent demand setbacks in India, Brazil and parts of the Middle East. In the near term, the headlines from India are very likely to dominate sentiment and provide strong price headwinds. Even if Brent calendar spreads do not roll down substantially, upside will certainly be capped. Meanwhile, the resolution to Libyan outages could weigh on Brent calendar spreads, with Libya's National Oil Corporation yesterday lifting force majeure on oil loadings from the eastern port of Hariga after settling a financing dispute with the new government of national unity, paving the way for higher output. The focus now shifts to this week's OPEC+ ministerial meeting to see whether the group will revisit its policy amid India's devastating second wave. The group's technical committee yesterday indicated that although the jump in cases in India is a major near-term risk, a strong global recovery this year is still in the cards. This helped Brent to pare back earlier losses during the Wall Street session and it eventually settled at $65.65/bbl, $0.46/bbl below the previous settlement. We think OPEC+ is unlikely to deviate from its plans to gradually increase production starting in May.Brent is hovering above $66/bbl as we write with the market today eyeing US consumer confidence for April, weekly API data on US oil and refined product inventories (to be released overnight) and quarterly earnings from BP. A recent Bloomberg report (citing an unidentified source familiar with the matter) said that OPEC+ may hold its JMMC meeting today, one day earlier than scheduled, to be held via teleconference rather than video conference, though this news has yet to be officially confirmed. Despite the positive momentum later yesterday, the headwinds for Brent remain strong, and we think it is set to retest support at $64.6/bbl today, with a break below taking it down to $62.9-63.9/bbl. We see a break above $66.5/bbl resistance toward the $67.1-68.1/bbl range as LD STEADY AHEAD OF FED DECISIONYesterday, gold traded more or less flat in a $1,775-1,785/oz range even though the 10y US Treasury yield edged up to 1.57% and EUR/USD slipped back to 1.208. Yesterday's durable goods orders print from the US showed a 0.5% m-o-m increase in March following the 0.9% decline in February. While the recent economic recovery in the US has created headwinds for gold, the durable goods data did not have a significant impact on prices yesterday. Market participants are currently looking ahead to the Fed meeting results due tomorrow. Although no major policy changes are expected, investors will pay close attention to Chairman Jerome Powell's comments on the economic outlook.Gold is trading at $1,780/oz as we write. The US consumer confidence data for April is due early on today (the consensus is 113), while a 7y UST auction and US home price data for February will be in focus later on. We think the dollar may find some support from strong US macro data today, but gold prices have been fairly steady with investors focused on the Fed decision. We expect gold to trade sideways in the $1,755-1,785/oz range SE AND PLATINUM GROUP METAL PRICES ON THE RISE, AS ARE PRICES FOR STEEL PRODUCTS AND IRON OREForward contracts on the LME closed higher yesterday. Aluminum rose 1.6% to $2,404/tonne, copper 2.1% to $9,751/tonne, nickel 1.7% to $16,666/tonne and zinc 2.2% to $2,915/tonne. Meanwhile, platinum rose 1.2% to $1,246/oz and palladium gained 2.3% to $2,927/oz. In the steel product and iron ore markets, prices have been on the rise, with global iron ore having risen since Friday by 2.4% to $180/tonne.Copper prices hit a 10-year high on Tuesday amid supply concerns with regard to Chile's top producers and a stronger demand outlook on the back of the global economic recovery and higher investment in green initiatives. The Chilean port workers union (workers from all ports except Arica, Angamos and Valparaiso) went on a nationwide strike yesterday, though it will most likely end tomorrow. According to preliminary data, the strike affected 25 port terminals, and more than 8,000 workers took part. Shipping disruptions and processing delays may continue for days after the strike ends.Steel products continue to rise in price as steelmakers are not managing to raise production in line with rising demand. As a result, in the US and Europe, it now takes 4-6 months to get steel from warehouses, versus one month usually. We expect the upward trend in steel product prices to continue until the end of spring.