Commodities Daily - August 17, 2021

> Oil under pressure ahead of eurozone GDP, US retail sales and industrial production data. This morning, Brent is trading near $69.50/bbl amid optimism that Indian oil demand (India is Asia's second-biggest consumer) is largely holding up. Investors today are eying a eurozone 2Q21 GDP reading, US July retail sales and industrial production, and API weekly inventories. We expect the US macro and inventory data to be upbeat and beat the consensus, which should support Brent back to its 100-day moving average at $70.3/bbl.> Gold climbs amid dip in 10y US Treasury yield. Gold edged up from $1,780/oz to $1,785/oz yesterday while the 10y US Treasury yield nudged down from 1.27% to 1.26%. US statistics provided some support. Gold is trading near $1,790/oz as we write. Today, the market awaits a speech by Fed Chair Jerome Powell, eurozone GDP for 2Q21, and US retail sales and industrial production for July. We expect gold to test support at $1,775/oz today.OIL UNDER PRESSURE AHEAD OF EUROZONE GDP, US RETAIL SALES AND INDUSTRIAL PRODUCTION DATADuring the first half of the day yesterday, front-month Brent slid around $2.30/bbl toward $68.10/bbl against the backdrop of fresh coronavirus outbreaks in Asia and weak Chinese economic data, with growth in retail sales, industrial output and refining slowing. Chinese refinery runs fell below 14 mln bpd in July as smaller private refineries cut runs, partly due to the floods in Henan. Meanwhile, travel restrictions due to the coronavirus outbreaks look set to weigh on demand and pressure refinery runs in August-September (we expect demand to fully recover before the peak travel season kicks off in China in late September). Chinese crude oil stock draws amounted to about 0.42 mln bpd in July (we expect Chinese state majors to boost crude oil purchases in late August-September to meet import targets, while refined product exports should remain subdued).US gasoline demand is reportedly softening as the Delta strain spreads and is leading to increased infections and hospitalizations, according to a survey by Descartes Labs. We note that vehicle miles travelled remain 2-3% below the 2019 levels, as has been the case this summer, which suggests that the worsening epidemiological situation had not yet significantly affected gasoline demand as of early August. That said, the seven-day average of daily new confirmed Covid-19 deaths rose 43% as of August 9, so we believe some caution on the US gasoline demand outlook is warranted. Meanwhile, US airline passenger numbers declined 1% w-o-w. In our view, Chinese and US demand in 3Q21 is likely to take a hit of around 0.25 mln bpd each versus a scenario in which the latest outbreaks had been avoided. Overall, in our view, the demand concerns, especially those in relation to China, look somewhat overdone. Later in the day yesterday, Brent managed to pare back most of its early losses and eventually settled at $69.51/bbl, $1.08/bbl below the previous settlement.This morning, Brent is trading near $69.50/bbl amid optimism that Indian oil demand (India is Asia's second-biggest consumer) is largely holding up, with Bloomberg reporting (citing India's three biggest retailers) gasoline sales above 2019 levels and diesel sales 8% lower (still an improvement on July, when they were down 11%). Investors today are eying a eurozone 2Q21 GDP reading, US July retail sales and industrial production, and API weekly inventories. We expect the US macro and inventory data to be upbeat and beat the consensus, which should support Brent back to its 100-day moving average at $70.3/ LD CLIMBS AMID DIP IN 10Y US TREASURY YIELDGold edged up from $1,780/oz to $1,785/oz yesterday while the 10y US Treasury yield ticked down from 1.27% to 1.26%. EUR/USD softened to 1.178 from 1.180, pressuring bullion. Yesterday's Empire State manufacturing index for August indicated a dramatic slump to 18.3 points from 43 in July. This underscored the slowing recovery and boosted gold. Bullion is responding to the spread of the Delta variant in the US, where new daily cases touched 252k yesterday, the highest level since mid-January. Markets are concerned about the prospect of new lockdowns that could impact the economic recovery, as has been seen in China. In July, Chinese retail sales growth slipped to 8.5% and industrial production growth eased to 6.4%, both below expectations, due to local lockdowns. However, we consider these fears to be overheated as the high vaccination rate in the US (51.3% of the population has been fully vaccinated) should prevent a significant rise in death rates and hospitalizations. Meanwhile, Boston Fed President Eric Rosengren yesterday indicated that he expects to see enough employment growth to spur the announcement of plans to reduce QE, which curbed the upside for gold.Gold is trading near $1,790/oz as we write. Today, the market awaits a speech by Fed Chair Jerome Powell, eurozone GDP for 2Q21, and US retail sales and industrial production for July. In the wake of the strong US jobs report for July and hawkish comments from other Fed officials last week, we think Powell may signal an imminent reduction in Fed asset purchases. Should this prove the case, gold would likely come under pressure. The consensus for eurozone GDP for 2Q21 stands at 2% Q-o-Q and 13.7% y-o-y. We expect gold to retest support at $1,775/oz today, which could pave the way to $1,755/