Commodities Daily - August 11, 2021

> Oil rebounds ahead of EIA inventory report and US CPI data. Brent is hovering below $71/bbl as we write, with the API having reported a slight drop in US crude oil and gasoline stockpiles and investors today eyeing the weekly EIA inventory data to confirm this, in addition to the release of US July CPI data. We anticipate an upbeat EIA inventory report, which could push Brent toward $71.5/bbl today, although a possibly high US CPI reading represents a risk to this momentum.> Gold holds steady even as Treasury yields rise. Gold traded sideways near $1,730/oz yesterday, while the 10y US Treasury yield climbed from 1.32% to 1.36%. Yesterday's somewhat weak US macro data failed to support gold. Bullion is trading near $1,730/oz as we write. Today, markets await US CPI data for July and a 10y Treasury note auction. We think bullion is likely to retest support at $1,725/oz.OIL REBOUNDS AHEAD OF EIA INVENTORY REPORT AND US CPI DATABrent gained $2.3/bbl to $71.2/bbl yesterday alongside broader global stock market gains and amid an upbeat EIA monthly report, with investors finding more optimism that global economic growth will continue even in the wake of a resurgent virus. US and European stock markets touched record highs yesterday amid expectations that economic growth will remain strong. In its monthly report, the EIA opted against downgrading its 2021 global demand growth estimate from last month despite recent efforts by the Chinese government to curb the spread of the virus. The EIA also kept its 2022 demand growth estimate unchanged. The EIA is still forecasting around 1.1 mln bpd of non-OPEC supply growth this year and around 3 mln bpd next year. Importantly, the EIA increased its 2021 liquids stock draw estimate by 0.3 mln bpd compared to last month, meaning that its 3Q21 stock draw forecast now stands at a much more realistic 1 mln bpd, versus 0.2 mln bpd last month. The EIA is projecting a 0.5 mln bpd stock build in 2022 as it expects a 3 mln bpd y-o-y increase in non-OPEC supply growth. We do not see this growth occurring, especially given the current investment levels and lack of drilling in Russia, Latin America and Europe. Brent eventually settled at $70.63/bbl, up $1.59/bbl on the day.Brent is hovering below $71/bbl as we write with the API having reported a slight drop in US crude (-0.816 mln bbl) and gasoline stockpiles (-1.11 mln bbl) and a rise in distillate inventories (+0.673 mln bbl). Investors are now eyeing today's weekly EIA inventory data, with the consensus pointing to a 0.75 mln bbl draw in crude stocks, a 2 mln bbl draw in gasoline inventories and a slight 0.5 mln bbl draw in distillate stocks. We think the crude oil and gasoline categories are likely to be more bullish than the API figures and the consensus estimates amid strong demand, lower imports and stronger exports. Following the release, Brent could push higher to $71.5/bbl, with the 50d MA of $73.5/bbl representing an optimistic technical target. However, the main risk to today's positive oil price outlook is the US July CPI data release due before the EIA inventory data. In each of the past four months, the US CPI has turned out to be above consensus, and we think this will happen again today as supply-demand imbalances and an upward tilt in housing costs could push the headline CPI to 5.5% y-o-y, versus the 5.3% consensus estimate. This would support the case for the Fed to start winding down QE sooner rather than later and could provide headwinds for risk assets; however, we think a moderate deviation from the consensus would not result in a major selloff for oil LD HOLDS STEADY EVEN AS TREASURY YIELDS RISEGold traded sideways near $1,730/oz yesterday. It tested and broke through support at $1,725/oz at one point, but it failed to consolidate below that level. Meanwhile, EUR/USD edged down from 1.173 to 1.172 and the 10y US Treasury yield rose from 1.32% to 1.36%, creating headwinds for gold. The ZEW economic sentiment index for the eurozone fell from 61.2 in July to 42.7 in August, the lowest reading since November, casting doubt on the economic recovery in Europe and weighing on gold prices. On the other side of the Atlantic, the US NFIB small business optimism index came in at just 99.7 in July, below the expected 102. While data pointing to a slowing pace of economic recovery in the US usually provides a boost for gold given the implications for Fed policy, this data point had little impact, probably because markets were looking ahead to today's July CPI data. In Fed comments, Chicago Fed President Charles Evans said he would need to see more jobs data to make a decision on tapering. Gold is trading near $1,730/oz as we write. Today, the market awaits July US CPI statistics and a 10y Treasury auction. The consensus for the CPI report is for headline readings of 0.5% m-o-m and 5.3% y-o-y. However, the CPI data has come in above expectations since March, and there have been no clear signs recently that the upward pressure on prices is abating. If inflation remains at an elevated level for a fifth straight month, the Fed's rhetoric could become more hawkish, pushing gold to lower levels. Bullion is likely to retest support at $1,725/oz today, while a move above $1,755/oz seems unlikely to