Commodities Daily - April 30, 2021

> Oil climbs as US cities continue reopening, UK road fuel sales rise. This morning, Brent is trading lower, as China's official manufacturing PMI edged down in April. Investors await 1Q21 GDP from the eurozone, March personal income and spending data from the US, and the EIA's monthly US oil production report and oil market outlook. In our view, the fact that Brent has failed to break resistance at $69/bbl signals a likely reversal of the uptrend from the March low of $60.3/bbl. This means that the benchmark could start to slide toward support at $67.7/bbl, with a break below possibly causing a fall into the $66.4-67.2/bbl range.> Gold dips as Treasury yields rise. Gold is trading at $1,765/oz as we write. Today's calendar for gold investors features eurozone GDP for 1Q21 and CPI for April and US PCE, personal income and spending data for March. We think bullion will retest $1,760/oz today, which could pave the way to $1,745/oz. A move above $1,785/oz seems unlikely to us.> Base metals mixed yesterday, China tightens taxation on steel exports. Yesterday, LME aluminum futures rose 0.7% to $2,417/tonne and nickel fell 1.0% to $17,257/tonne, while copper quotes remained basically flat at $9,885/tonne. The current week on the LME might have been the best in recent memory: for the last five sessions, base metals are all up, with the biggest gains in nickel (7.4%) and tin (6.3%). This has been supported by declining stockpiles of these metals at the largest exchanges. On Wednesday, China's finance ministry announced changes, effective May 1, to the taxation of exports and imports on rolled steel and semi-finished products. Steelmakers and metal traders in China will no longer receive a VAT refund for exporting steel products. We think the result will be higher prices for steel products outside of China and Chinese steel importers will look for new suppliers of rolled products.OIL CLIMBS AS US CITIES CONTINUE REOPENING, UK ROAD FUEL SALES RISEAfter climbing from $67.1/bbl to $67.5/bbl during the Asian trading session yesterday, the now-expiring Brent contract for June began to surge toward $69/bbl during the European trading hours. It drew support from the European Commission's upbeat monthly economic sentiment survey (the economic sentiment gauge surged m-o-m in April), which indicated that the eurozone economy could be set for a sharp recovery in 2H21 (in line with ECB President Christine Lagarde's thinking) after Europe's vaccination program catches up. Later on, attention shifted toward US 1Q21 GDP data that showed a 6.4% annualized Q-o-Q increase. Though this was slightly below the Bloomberg consensus estimate of 6.7%, the details were rather encouraging, suggesting that the economy's performance may have been somewhat stronger than the headline figure suggested. For instance, there was a solid increase in personal consumption (consumers account for almost 70% of the US economy), fixed residential and nonresidential investment, and government spending. In addition, initial jobless claims fell to a fresh pandemic-era low, though they were higher than expected.Meanwhile, the motor fuel demand picture has continued to brighten with major US cities coming out of lockdown. New York City aims to fully reopen by July 1, while Chicago is starting to ease its restrictions. In the UK, government data shows that road fuel sales have continued to recover and are already near last year's summer levels. On top of that, Bloomberg recently highlighted that fuel consumption may also get a boost from China's extended holiday, with mobility expected to climb to a record. The June Brent contract eventually settled at $68.56/bbl yesterday, fixing $1.29/bbl above the previous settlement. This morning, Brent is sliding toward $68.1/bbl, as China's official manufacturing PMI edged down in April. Investors await 1Q21 GDP from the eurozone, March personal income and spending data from the US, and the EIA's monthly US oil production report and oil market outlook. We think the monthly outlook could weigh on sentiment, as the EIA could lower its estimate for global oil demand this year due to the devastating coronavirus situation in India. In our view, the fact that Brent has failed to break resistance at $69/bbl signals a likely reversal of the uptrend from the March low of $60.3/bbl. This means that the benchmark could start to slide toward support at $67.7/bbl, with a break below possibly causing a fall into the $66.4-67.2/bbl LD DIPS AS TREASURY YIELDS RISEGold closed at $1,770/oz yesterday, following a test of the $1,760/oz support level during the day. The 10y US Treasury yield climbed to 1.64%, while EUR/USD held steady at 1.212. US GDP expanded at a 6.4% annualized rate last quarter, versus 4.3% growth in 4Q20. US growth accelerated in the first quarter as the government gave money to mostly lower-income households, fueling consumer spending and setting the stage for what is expected to be the strongest performance this year in nearly four decades. Meanwhile, the labor market continues to gradually recover. US initial jobless claims fell by 13k to a seasonally adjusted 553k during the week to April 24. This significantly pressured gold yesterday, as investors were concerned about monetary policy tightening.Gold is trading at $1,765/oz as we write. Today's calendar for gold investors features eurozone GDP for 1Q21 and CPI for April and US PCE, personal income and spending data for March. We think bullion will retest $1,760/oz today, which could pave the way to $1,745/oz. A move above $1,785/oz seems unlikely to SE METALS MIXED YESTERDAY, CHINA TIGHTENS TAXATION ON STEEL EXPORTSYesterday, LME aluminum futures rose 0.7% to $2,417/tonne and nickel fell 1.0% to $17,257/tonne, while copper quotes remained basically flat at $9,885/tonne. The current week on the LME might have been the best in recent memory: for the last five sessions, base metals are all up, with the biggest gains in nickel (7.4%) and tin (6.3%). This has been supported by declining stockpiles of these metals at the largest exchanges. However, the latest data showed a reversal of this trend, with stocks of aluminum rising 2.6% on the day to 2.2 mln tonnes. Current aluminum stocks are close to 3.5% of global consumption in 2020.On Wednesday, China's finance ministry announced changes, effective May 1, to the taxation of exports and imports on rolled steel and semi-finished products. Steelmakers and metal traders in China will no longer receive a VAT refund (VAT set at 13%) for exporting steel products. In addition, the import duty (2%) on semi-finished products (slabs, billets) from non-ASEAN countries was canceled.Chinese steelmakers export 5-7 mln tonnes of steel products per month, while for comparison Russia exports 2-3 mln tonnes of steel products and semi-finished products per month. Abolishing the VAT refund for Chinese steel exports is tantamount to imposing export duties, and we think the result will be higher prices for steel products outside of China, while Chinese steel importers will look for new suppliers of rolled products. This will have a significant impact on the Russian steel market, as prices in the Russian domestic market are set based on export