Commodities Daily - April 8, 2021

> Oil under pressure amid mixed EIA report as pandemic worsens in India, Canada and Japan. Today, the market awaits US weekly jobless claims data and further coronavirus news, which we think will pressure Brent down toward the $61.2/bbl support level. Resistance is still at $63.8/bbl, with a break above potentially leading to the $64.7-$65.5 range, though we regard this as unlikely.> Gold steadies as investors weigh Fed minutes ahead of Powell speech. During the Asian trading session today, gold rose to $1,745/oz, where it is quoted as we write. Investors are eyeing Fed Chairman Jerome Powell's speech and US initial jobless claims. As the dollar weakness has not played out, we expect bullion to try to consolidate above resistance near $1,745/oz, though negative news flow could see it pressured down to the $1,720/oz support level.> Copper falling on growing stockpiles; Fed minutes indicate continued support for economy. The 3m futures contract for copper on the LME fell 1.45% yesterday to $8,916/tonne on the back of rising copper inventories. We consider this focus on inventories excessive. They have risen on the LME and the Shanghai Futures Exchange by a total of 124 kt since the beginning of March, which represents just two days of global consumption. The minutes from the latest Fed meeting, released yesterday, suggest that it will be some time before conditions improve enough for the Fed to consider reducing its current support for the economy.OIL UNDER PRESSURE AMID MIXED EIA REPORT AS PANDEMIC WORSENS IN INDIA, CANADA AND JAPANBrent was trading at $62.2-63.5/bbl yesterday morning and stood at $62.6/bbl ahead of the EIA weekly inventory update. Following the API's reported 2.62 mln bbl crude oil draw, the EIA yesterday registered a stronger 3.52 mln bbl draw to 498.3 mln bbl. This came amid a 0.26 mln bpd increase in exports to 3.43 mln bpd, a 0.1 mln bpd increase in refinery inputs to 15.04 mln bpd (rising for the first time above 15 mln bpd in more than a year) and a 0.2 mln bpd decline in crude oil production to 10.9 mln bpd. A 0.12 mln bpd increase in imports to 6.26 mln bpd proved insufficient to offset the overall build. The refined product data, meanwhile, was bearish. Gasoline stocks were up by a strong 4.04 mln bbl to 234.6 mln bbl, while distillate stocks rose 1.45 mln bbl to 145.5 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) rose 2.31 mln bbl amid a 2.6 mln bbl build in the "other oils" category.Following the release, Brent slid to an intraday low of $61.6/bbl, despite crude inventories falling for a second consecutive week, as refineries are processing more oil. Also weighing on prices was the fact that the refined product markets have started to struggle, with 5.14 mln bpd of processing volumes added since February. Although gasoline inventories are at their highest levels since February, this is also due to higher gasoline imports, which have topped 1.2 mln bpd for the first time since May 2019, most of it coming from Europe. We believe this rate of imports is unsustainable, as European refining will remain low because European gasoline inventories are too low to keep supplying the US at this rate. US demand is healthy and continues to grow, with total refined products demand only just below seasonal norms, and about 0.2 mln bpd below where it was in 2019. Thus, we expect total US oil and refined product inventories to start trending lower in mid-May.Later on, Brent pared back most of the losses as the S&P 500 notched up another record, with the minutes from the latest Fed meeting showing that officials think it will take some time before conditions allow for the massive asset-purchase program to be scaled back. Also supportive was news that New York City beaches will open for Memorial Day weekend at the end of May, highlighting the progress major cities in the world's largest oil-consuming country are making toward reopening completely. Brent eventually settled at $63.16/bbl, up $0.42/bbl on the day.Brent is trending lower as we write as the focus is shifting toward the worsening coronavirus situation in certain parts of the world. India, the world's third-largest oil importer, is now recording more than 100k new coronavirus cases per day (up from around 11,000 in February). State-run refiners in India are already looking to buy less crude from Saudi Arabia, with demand poised to dip amid the resurgence of Covid-19. Maharashtra, which includes Mumbai, the financial capital, has ordered private companies to work remotely and has shut malls and restaurants through April. In Ontario, officials have issued a stay-at-home advisory for the next four weeks to tackle a new, more dangerous wave. The governor of Tokyo has said she is consulting with experts and could formally request stronger virus curbs. Today, the market awaits US weekly jobless claims data and further coronavirus news, which we think will pressure Brent down toward the $61.2/bbl support level. Resistance is still at $63.8/bbl, with a break above potentially leading to the $64.7-65.5/bbl range, though we regard this as LD STEADIES AS INVESTORS WEIGH FED MINUTES AHEAD OF POWELL SPEECHGold yesterday moved sideways around $1,740/oz and consolidated slightly below that level as the 10y US Treasury yield kept steady at 1.66%. Meanwhile, EUR/USD also consolidated near 1.187, adding to the support for gold. According to the latest Fed minutes, FOMC officials remain wary about the risks from the pandemic and are committed to bolstering the economy until a recovery is certain. Only a few officials cited financial stability risks stemming from the Fed's current policy of maintaining its O/N benchmark lending rate near zero and buying $120 bln of bonds every month. Thus, the minutes signaled more of the same in monetary policy, and gold did not react to them. US President Joe Biden yesterday appealed to US companies to foot most of the bill for his $2 trln infrastructure proposal. However, its passage may ultimately be delayed and significantly curtailed, so any pressure to come for gold will be in the long term, which is why it failed to react yesterday.During the Asian trading session today, gold rose to $1,745/oz, where it is quoted as we write. The market is now turning its attention to comments by Fed Chairman Jerome Powell during an IMF panel discussion later today, which are likely to reiterate the dovish policy outlook. Investors will also eye the latest US initial weekly jobless claims. As the dollar weakness has not played out, we expect bullion to try to consolidate above resistance near $1,745/oz, though negative news flow could see it pressured down to the $1,720/oz support PPER FALLING ON GROWING STOCKPILES; FED MINUTES INDICATE CONTINUED SUPPORT FOR ECONOMYThe 3m futures contract for copper on the LME fell 1.45% yesterday to $8,916/tonne on the back of rising copper inventories. We consider this focus on inventories excessive. They have risen on the LME and the Shanghai Futures Exchange by a total of 124 kt since the beginning of March, which represents just two days of global consumption. Meanwhile, yesterday nickel futures rose 0.62% to $16,634/tonne, and zinc futures added 0.30% to $2,833/tonne. Aluminum was flat at $2,260/tonne.The minutes from the latest Fed meeting, released yesterday, suggest that it will be some time before conditions improve enough for the Fed to consider reducing its current support for the economy. Some of the FOMC officials said, however, that interest rates may have to be raised earlier than expected by most of their colleagues, and possibly as early as next year. The scale of Fed support is a key question for base metals markets (support is positive for quotes).