Commodities Daily - August 12, 2021

> Oil gains amid weaker dollar, mixed EIA inventory report and ahead of IEA and OPEC monthly reports. Brent is trading near the $71.5/bbl mark as we write. Investors are focused today on the monthly IEA and OPEC reports, the US July PPI print and weekly initial jobless claims. In our view, Brent could struggle to rally above $72/bbl and is instead likely to remain near $71.5/bbl as both the IEA and OPEC reports could see downward revisions to the global demand outlooks amid the global coronavirus flare-ups, especially in Asia.> Gold prices get a lift from US inflation data. Gold rose from $1,730/oz to $1,750/oz yesterday, while the 10y US Treasury yield slid from 1.36% to 1.33%. The US CPI statistics yesterday supported gold. Bullion is trading near $1,750/oz as we write. Today, markets await US PPI data for July, US weekly jobless claims and eurozone industrial production for June. Bullion will likely retest resistance at $1,755/oz today, with a break above opening the way to $1,775/oz.OIL GAINS AMID WEAKER DOLLAR, MIXED EIA INVENTORY REPORT AND AHEAD OF IEA AND OPEC MONTHLY REPORTSAfter trading within a $70.5-71.0/bbl range at the start of the day yesterday, front-month Brent began to slide, falling sharply toward $69.0/bbl amid US calls on OPEC+ to increase production more quickly. US National Security Advisor Jake Sullivan said in a statement that the recent production increases by OPEC+ were "simply not enough" and then President Joe Biden urged OPEC to reverse the pandemic-era production cuts, calling it essential in order to make gasoline prices more affordable; nevertheless, both stopped short of specifying how fully or quickly OPEC+ should reverse the output cuts. In our view, these statements were driven by domestic politics and are unlikely to lead to serious action.Later on yesterday, Brent started to generate positive momentum as EUR/USD began to rally amid the US July inflation print. Consumer price inflation was reported at 5.4% y-o-y, slightly above the 5.3% consensus estimate. The print generally met market expectations and the dynamics did not change much from previous months, though it failed to provide relief for market worries about inflation, which have been weighing on sentiment and driving the monetary policy debate. At the same time, some Fed officials continued to cool down tightening expectations in the near term.Ahead of the EIA inventory report yesterday, Brent was trading near $70/bbl. The EIA reported a slight 0.45 mln bbl weekly draw in US crude oil stocks, which was attributable to a recovery in refinery runs, a strong pickup in exports and lower imports. Crude oil production rose 0.1 mln bpd w-o-w to 11.3 mln bpd. Meanwhile, gasoline stockpiles declined as well, even though demand for gasoline dropped w-o-w, down by more than 0.3 mln bpd, possibly as a result of the spread of the Delta coronavirus strain cutting into travel and kids returning to school. Jet fuel demand was also down to the lowest level since June amid flight cancellations, though jet fuel inventories did not rise either. Diesel inventories were up by more than 1.7 mln bbl w-o-w as fuel makers prepare to meet demand for the harvesting season. For the rest of August, we expect oil and gasoline inventories to keep drawing at a moderate pace, providing price tailwinds for oil. Following yesterday's relatively upbeat EIA release, Brent began to rally toward $71.7/bbl, supported as well by positive stock market momentum, and eventually settled at $71.44/bbl, $0.81/bbl above the previous settlement.This morning, Brent was trading near the $71.5/bbl mark. Investors are focused today on the monthly IEA and OPEC reports, the US July PPI print and weekly initial jobless claims. In our view, Brent could struggle to rally above $72/bbl and is instead likely to remain near $71.5/bbl as both the IEA and OPEC reports could see downward revisions to the global demand outlooks amid the global coronavirus flare-ups, especially in LD PRICES GET A LIFT FROM US INFLATION DATAGold rose from $1,730/oz to $1,750/oz yesterday, while the 10y US Treasury yield slid from 1.36% to 1.33%. EUR/USD edged up from 1.172 to 1.174, creating mild tailwinds for bullion. Yesterday's US inflation statistics were mixed but on the whole supportive for gold. The US headline CPI readings for July came in at 0.5% m-o-m, in line with expectations and down from 0.9% m-o-m in June, and 5.4% y-o-y, flat versus the June level. Core inflation, which excludes energy and food prices, came in at 0.3% m-o-m, below the consensus estimate of 0.4% but down from 0.9% in June, and 4.3% y-o-y, in line with the consensus and down from 4.5% in June. All in all, the statistics showed an ease in inflationary pressure, though the 5.4% y-o-y headline reading was still exceedingly high and well above the Fed's 2% target. .However, markets had been looking for signs of a slowdown, and it looks like they found some yesterday. Many investors took the data as suggesting that the Fed may be right that the current uptick in inflation is mainly transitory in nature, which helped ease concerns about earlier than expected policy tightening. Additional support for bullion came from the US 10y Treasury auction yesterday, where demand was high. Meanwhile, Dallas Fed President Robert Kaplan indicated that the Fed should make an announcement in September about tapering its QE program and then perhaps begin tapering in October. His colleague, Kansas City Fed President Esther George, also made some hawkish comments, saying that the current conditions may already call for tapering. These remarks from the Fed created headwinds for gold, preventing it from consolidating above resistance at $1,755/oz.Gold is trading near $1,750/oz as we write. Today, the market awaits July US PPI statistics, US weekly jobless claims and eurozone industrial production for June. The consensus estimates for the PPI report are 0.6% m-o-m and 7.2% y-o-y. Bullion is likely to retest resistance at $1,755/oz today, with a break above opening the way to $1,775/