Commodities Daily - April 29, 2021

> Oil climbs on upbeat EIA report as rising demand optimism offsets surge in virus. Brent is trading near $67.5/bbl as we write, with investors today eyeing preliminary US 1Q21 GDP and weekly jobless claims. Brent continues to target its April 20 high of $68.1/bbl, as it has broken resistance at $67.1/bbl, though it still seems most likely to consolidate in the $64.7-$68.1/bbl range over the next week or two.> Gold gains as Treasury yields slip after Fed results. Gold is trading at $1,785/oz as we write. Investors are looking ahead to data releases including US 1Q21 GDP and several sentiment indexes from the eurozone. We think gold may test $1,760/oz today, which would open a path to $1,745/oz, while we see a move above $1,785/oz as unlikely. > Base metals on LME extend gains amid ongoing stockpile declines; Fed to keep asset purchases unchanged. Outperformers included tin (up 5.1% to $28,539/tonne) and nickel (up 2.7% to $17,429/tonne). We note the rally in nickel prices in particular over the last four sessions - they are up 8.5% and managed to break out of the $16,000-16,500/tonne corridor in which they had been trading for a month and a half.OIL CLIMBS ON UPBEAT EIA REPORT AS RISING DEMAND OPTIMISM OFFSETS SURGE IN VIRUS Brent was trading around the $66.5/bbl mark yesterday morning but advanced toward $67.1/bbl ahead of the EIA inventory update. Following the API's previously reported 4.32 mln bbl crude oil build, the EIA yesterday registered only a slight 0.09 mln bbl increase. This came amid a 1.21 mln bpd rise in imports to 6.62 mln bpd and a tiny 0.007 mln bpd dip in exports to 2.54 mln bpd. A 0.25 mln bpd increase in refinery runs to 15.0 mln bpd (refineries once again increased runs to new highs seen since the start of the pandemic) and a 0.1 mln bpd decrease in US crude oil production to 10.9 mln bpd were just insufficient to offset the overall buildup. The refined product data was more bullish. Gasoline stocks ticked 0.09 mln bpd higher to 235 mln bpd (they have been virtually flat for most of April), while distillate stocks fell 3.34 mln bbl to 139.05 mln bbl. The gasoline recovery still has a way to go for demand to return to pre-pandemic levels. The rolling four-week average for gasoline demand is trailing the 2019 level by just over half a million barrels a day. We are currently at 8.93 mln bpd versus 9.47 mln bpd in the same week in 2019. Diesel demand was solid, driven by trucking. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 1.63 mln bbl. We continue to expect an acceleration in total US oil and refined product inventory draws starting from mid-May. Following the release, Brent rallied to an intraday high of $67.85/bbl and eventually ended the day at $67.27/bbl, up $0.85/bbl from the previous settlement.Brent is trading near $67.5/bbl as we write, with investors today eyeing preliminary US 1Q21 GDP and weekly jobless claims. Brent continues to target its April 20 high of $68.1/bbl, as it has broken resistance at $67.1/bbl, though it still seems most likely to consolidate in the $64.7-$68.1/bbl range over the next week or two. We believe the GDP data is likely to boost Brent to $68.1/bbl today as we expect it to beat the consensus estimates and show growth of around 7%. Meanwhile, India remains the key drag for oil prices. A drop in fuel consumption is prompting some refiners to consider boosting exports in a bid to avoid deep cuts to crude processing. Furthermore, Rystad Energy (a major independent energy research agency) has cut its demand estimates for India (by 0.575 mln bpd in April and 0.915 mln bpd in May to 3.93 mln bpd) and now forecasts a 1.4 mln bpd surplus in global inventories next month due to the impact. Partially due to the Indian situation, front-month swaps of the Dubai oil benchmark have shifted to contango for the first time since November. The prompt calendar spread for Brent has also slipped and is now showing a weaker backwardation. Although this could be temporary, Brent crude loadings in the British North Sea, which underpin the global Brent benchmark, could stop in mid-May if no deal is reached between the Unite union and the Shetland Islands Council that employs the LD GAINS AS TREASURY YIELDS SLIP AFTER FED RESULTS Yesterday, gold edged up to around $1,780/oz as the 10y US Treasury yield slipped to 1.61%. Meanwhile, EUR/USD rose to end the day slightly higher at 1.212. These moves in what are among the main drivers for gold prices were triggered by the outcome of the FOMC meeting. The Fed held interest rates in place and made no adjustments to its bond-buying program, while nodding to the strengthening economy. Chairman Jerome Powell also said during his press conference that it was still too early to even consider rolling back the Fed's emergency support measures with so many workers still left jobless by the pandemic. Yesterday's macro data was also supportive for gold prices yesterday. The preliminary US wholesale inventories data for March showed an increase of 1.4% after a just 0.9% increase in February, which could mean that the pace of the economic recovery is slowing. In the evening, US President Joe Biden proposed a sweeping new $1.8 trln support package in a speech to a joint session of Congress. Biden's plan includes $1 trln in spending on education and childcare over 10 years, along with $800 bln in tax credits. However, the unveiling of his proposal had limited effect on gold yesterday given the hurdles it will face. Gold is trading at $1,785/oz as we write. Investors are awaiting US GDP data for 1Q21 and initial jobless claims data for the past week. If the data turns out as positive as most of the US macro data recently has been, gold will likely come under pressure. We think gold may test $1,760/oz today, which would open a path to $1,745/oz, while we see a move above $1,785/oz as SE METALS ON LME EXTEND GAINS AMID ONGOING STOCKPILE DECLINES; FED TO KEEP ASSET PURCHASES UNCHANGEDBase metal forward contracts on the LME extended recent gains yesterday. Outperformers included tin (up 5.1% to $28,539/tonne) and nickel (up 2.7% to $17,429/tonne). The price gains are taking place against the backdrop of ongoing draws in exchange stockpiles: copper stocks at the LME and Shanghai Futures Exchange decreased a total of 1.6% over the course of the day yesterday, while aluminum and nickel stocks fell 0.2% and 0.3%, respectively.We note the rally in nickel prices in particular over the last four sessions - they are up 8.5% and managed to break out of the $16,000-16,500/tonne corridor in which they had been trading for a month and a half. The rally seems to have been driven not by new stories emerging in the nickel market but rather by a catching-up trend in nickel relative to other base metals, which have risen 3.2-12.6% over the month.Yesterday, the Fed said it was not ready to consider reducing support and would continue asset purchases. At the same time, it characterized inflationary pressure as likely transient. This backdrop should further support metal quotes on the LME