Commodities Daily - April 7, 2021

> Oil stabilizes ahead of EIA inventory update. We expect Brent to retest support at $61.2.bbl today as we think yesterday's bounce at this level is unlikely to be repeated given the EIA appears set to report strong refined product builds. Resistance is at $63.8/bbl, with a break above potentially leading into a $64.7-65.5/bbl range, though we regard this as unlikely.> Gold advances as US Treasury yields ease. Gold is trading around $1,740/oz as we write, with investors eying the FOMC minutes later today, which could shed some light on the prospects for scaling down QE once the US economy has recovered sufficiently. We expect bullion to test resistance at $1,745/oz today, while a move below $1,720/oz seems unlikely.> Metals on LME catch up to COMEX and SHFE, today sees slight correction; IMF upgrades Chinese GDP growth forecast. Yesterday, copper rose 2.92%, nickel 3.24%, aluminum 1.91% and zinc 1.78%. The IMF raised its forecast for Chinese GDP growth in 2021 from 8.1% to 8.4%. This is important because in March there were doubts about the Chinese economy, which consumes half of the world's metals and raw materials. The preliminary data for March, however, seems to point to continued high growth. In addition, participants in the metals markets continue to closely monitor the new Biden stimulus proposal in the US.OIL STABILIZES AHEAD OF EIA INVENTORY UPDATEBrent opened near $62/bbl yesterday and climbed toward $64/bbl in early European trading, a level that was eventually surpassed (albeit with a brief correction to $63/bbl) in early Wall Street trading, with Brent peaking at $64.3/bbl. One of yesterday's positive takeaways was vaccination progress in the US and EU, with the US president saying he wants all American adults to be offered a jab by April 19, two weeks earlier than his previous goal. In the EU, most member states should have enough supplies to immunize the majority of people by the end of June.Yesterday's focus was on the start of formal talks to try to restore the 2015 Iran nuclear deal, which has triggered some misguided speculation that US sanctions on Iranian oil exports will be eased imminently. Iran described yesterday's talks as "constructive" but stuck to its demand that the US should first remove all sanctions for real progress to be possible. Diplomats will meet again on Friday to continue negotiations. The US has no plans to remove the sanctions imminently despite the start of formal talks. We believe that 4Q21 is a more realistic target for Iranian oil production to resume rising strongly following any diplomatic breakthrough.Further support for oil came from the IMF, which raised its global economic growth forecast to 6% for this year from 5.5% amid the US fiscal stimulus and vaccine rollouts across the planet. The IMF now expects global GDP to expand 4.4% next year, above its previous estimate of 4.2%. However, Brent later slid to $62.5/bbl despite the EIA's rather upbeat monthly oil market report, with the agency lifting its global demand growth projection for 2021 by 0.16 mln bpd, with 2021 non-OPEC supplies being revised downward by 0.33 mln bpd. Furthermore, the EIA has slashed its US oil production forecasts to 11.04 mln bpd for this year (down from the 11.15 mln bpd it was estimating following after the deep freeze in February that shut down the Texan oil industry) and cut its forecast for 2022 by 0.1 mln bpd. Brent eventually settled at $62.74/bbl, up $0.59/bbl on the day.Overnight, the API reported that US crude oil stocks fell 2.62 mln bbl last week. However, the refined product data was downbeat, showing a strong 4.55 mln bbl increase in gasoline stocks and a 2.8 mln bbl build in distillate inventories. The EIA weekly inventory report is due today at 17:30 Moscow time. The Bloomberg consensus is for a 2 mln bbl crude draw, a 0.6 mln bbl decrease in gasoline stocks and a 1 mln bbl increase in distillate stocks. We think the EIA report is likely to be taken bearishly, as it is likely to confirm the API's strong reported refined product stock builds stemming from elevated refining activity. On the back of this, investors could become concerned that demand might not be able to offset this elevated refined product production in the coming weeks. We expect Brent to retest support at $61.2/bbl today as we think yesterday's bounce at this level is unlikely to be repeated. Resistance is at $63.8/bbl, with a break above potentially leading into a $64.7-65.5/bbl range, though we regard this as LD ADVANCES AS US TREASURY YIELDS EASEGold yesterday tested resistance at $1,740/oz and consolidated slightly above that level amid a decline in the 10y US Treasury yield to 1.66%, which was likely pulling back following the sharp rise in 1Q21. EUR/USD firmed to 1.187, creating additional support for gold. The IMF yesterday upgraded its economic growth forecasts for the US to 6.4% in 2021 and 3.5% in 2022. It also raised its growth forecasts for the eurozone to 4.4% in 2021 and 3.8 in 2022 and lifted its global growth forecast to 6% for this year from 5.5% amid US fiscal stimulus and vaccine rollouts across the world. The fund also raised its global GDP forecast for 2022 from 4.2% to 4.4%. However, this increased optimism failed to pressure gold yesterday. Gold is trading near $1,740/oz as we write. The market is now turning its attention to the FOMC meeting minutes for March due later today, which could shed some light on the prospects for scaling down QE once the US economy has recovered sufficiently. Given strong US employment data in March and the prospects for further significant improvements, we expect gold to come under pressure soon. We expect bullion to test resistance at $1,745/oz today, while a move below $1,720/oz seems TALS ON LME CATCH UP TO COMEX AND SHFE, TODAY SEES SLIGHT CORRECTION; IMF UPGRADES CHINESE GDP GROWTH FORECASTYesterday, the prices of 3m futures for base metals on the LME jumped, catching up with growth on the Shanghai Futures Exchange and COMEX. Copper rose 2.92% to $9,047/tonne, nickel 3.24% to $16,740/tonne, aluminum 1.91% to $2,268/tonne and zinc 1.78% to $2,824/tonne. The tin contract added 2.75% to $25,815/tonne. Today, however, most of these metals (except for tin) have seen a slight correction. Copper quotes began to decline again after reaching the $9,000/tonne resistance level. Overall, trading today should be calm, with the main focus being developments around the new Biden infrastructure proposal in the US. It is expected to have a significant positive impact on metals demand in the US. Meanwhile, according to reports, following the military coup in Myanmar, the work of customs and logistics companies is paralyzed, which should lead to a halt in the export of raw materials to the world market. This news is most important for the tin market.The IMF yesterday released new economic forecasts for the global economy. The highlights included an upward revision to Chinese 2021E GDP growth from 8.1% to 8.4%. In early March, the Chinese leadership guided GDP growth at "at least 6%" in 2021, while analyst forecasts were significantly higher, in a range of 7.5-10.0%. This was perceived by commodity market participants as a signal of an imminent slowdown in the Chinese economy, which put pressure on quotes on the LME for the entire month of March. However, preliminary data from the real sector of the Chinese economy (for example, data on steel consumption or cement production) at end-March showed that the country's economy and industry were growing at a much faster pace. Analysts have now begun to raise their forecasts for Chinese economic growth (note that the economy accounts for more than half of global consumption of metals and raw materials). We believe that the start of upward revisions to Chinese growth forecasts should boost base metals prices in April-May.In the middle of the month, China will publish official data for March on cement production (a key indicator of the country's construction sector), cars (providing demand for a wide range of metals), electricity (demand for thermal coal) and more. We think doubts about Chinese growth are likely to be dispelled by the