Commodities Daily - February 10, 2021

> Brent pushes higher to $61/bbl amid EIA monthly market report. We expect a mixed EIA weekly inventory report today, with a slight crude stock draw similar to last week's 1 mln bbl decrease amid likely builds in gasoline and possibly even distillate stocks. This morning, Brent is trading just above the $61/bbl mark. Resistance is $61.4/bbl, with gains thereafter leading into the $61.7-62.2/bbl range, but we think mixed EIA data could lead Brent sustaining its current sideways pattern, trading around $61/bbl, and then sliding back toward support at $60.6/bbl during the US session. > Gold consolidates after rally; US CPI and Jerome Powell's speech eyed. Today's US January CPI data will be of major importance, because gold is likely to find its direction dictated by the data. We expect a moderately optimistic number, slightly above the consensus estimate of 0.3%. This would push inflation expectations slightly higher, but by nowhere near enough for investors to start aggressively pricing in monetary policy tightening. This would be supportive for gold, which we would expect to break above technical resistance at $1,853/oz and subsequently target $1,875/oz.BRENT PUSHES HIGHER TO $61/BBL AMID EIA MONTHLY MARKET REPORTAfter trading at around $61/bbl during the first half of the day yesterday, front-month Brent began to generate negative momentum, as S&P 500 futures started to fall and oil investors began to cautiously take profit after this month's rally. Brent eventually slid to $60/bbl in the early US trading hours. During the Wall Street session, investors were eying the release of the EIA's monthly oil market report. The report turned out mostly bearish, but a downgrade of US crude oil production estimates for 2021 supported Brent, which eventually settled at $61.09/bbl, fixing $0.53/bbl above the previous settlement.The EIA downgraded its previous forecast for 2021 global demand by 0.10 mln bpd to 97.67 mln bpd, which would be up versus the 92.29 mln bpd in 2020. North America and the Asia Pacific led the downward revisions, and the Middle East received the largest upward revision. Also on the bearish side was a 0.13 mln bpd upward revision to 2021 non-OPEC supply, with North America, the FSU and Norway leading the upward revisions, although this was partly offset by a downward revision to Brazilian production. The main highlight, however, was that the EIA now expects US liquids production to be higher by 0.12 mln bpd y-o-y this year, but crude oil production to decline by 0.29 mln bpd y-o-y (versus its previous forecast of a 0.19 mln bpd drop) to average 11.02 mln bpd. This downward revision comes despite the recent surge in oil prices and uptick in the US active oil rig count. According to the EIA, output should rise in 2H21 and in 2022, as production from new wells should exceed declines from older wells. In 2022, US crude oil output is expected to rise by 0.51 mln bpd y-o-y to 11.53 mln bpd versus the 0.39 mln bpd increase expected previously. We think this underscores the fact that a sharp US crude oil production rebound is not a major risk for the market this year even amid higher prices and should not derail the bullish 2H21 market outlook. Overnight, the API reported a 3.5 mln bbl draw in US crude stocks last week to 474.1 mln bbl. This came amid a 0.10 mln bpd increase in refinery inputs and despite a 0.1 mln bpd increase in imports. Crude oil stocks at Cushing fell 1.4 mln bbl. The refined product data was bearish, however, showing a strong 4.8 mln bbl increase in gasoline stocks and a 0.49 mln bbl draw in distillate stocks. The EIA weekly inventory report is due today at 18:30 Moscow time. The Bloomberg consensus is for a 0.8 mln bbl crude stock draw, a 2.1 mln bbl increase in gasoline stocks and a 1.3 mln bbl decrease in distillate stocks. In addition, today's agenda includes US January CPI data, which could shape risk appetite on global markets during the second half of the day.We expect a mixed EIA report, with a slight crude stock draw similar to last week's 1 mln bbl decrease amid likely builds in gasoline and possibly even distillate stocks. This morning, Brent is trading just above the $61/bbl mark. Resistance is $61.4/bbl, with gains thereafter leading into the $61.7-62.2/bbl range, but we think mixed EIA data could lead to Brent sustaining its current sideways pattern, trading around $61/bbl, and then sliding back toward support at $60.6/bbl during the US session. We note that Brent and WTI technicals suggest a correction is due, with prices having surged into overbought territory.GOLD CONSOLIDATES AFTER RALLY; US CPI AND JEROME POWELL'S SPEECH EYEDGold advanced by more than $15/oz yesterday morning and ended up slightly short of the $1,850/oz mark after surging from $1,810/oz on Monday. It then slid in the afternoon and ended the day at $1,835/oz, showing a muted positive reaction to further dollar weakening and a slight correction in 10y US Treasury yields. Investors continue to monitor the progress of Joe Biden's $1.9 trln Covid relief plan, with the House aiming to vote on the full bill during the last week of February. House Speaker Nancy Pelosi has pledged to secure congressional approval by mid-March given enhanced jobless benefits approved in the December aid package are due to expire. We believe the measures proposed by Biden will not significantly boost expectations of monetary policy tightening given that US economic data continues to surprise to the downside in some areas. We therefore think gold is likely to remain an attractive investment in the face of monetary and fiscal stimuli, which are increasing inflationary expectations.Gold is again moving higher as we write and is consolidating above $1,845/oz, showing a delayed positive reaction to the ongoing rally in EUR/USD. Today's US January CPI data will be of major importance, because gold is likely to find its direction dictated by the data. We expect a moderately optimistic number, slightly above the consensus estimate of 0.3%. This would push inflation expectations slightly higher, but by nowhere near enough for investors to start aggressively pricing in monetary policy tightening. This would be supportive for gold, which we would expect to break above technical resistance at $1,853/oz and subsequently target $1,875/oz.A below-consensus inflation reading would be neutral for gold, in our view, as it would reassure investors that additional fiscal assistance is indeed required to boost growth. The worst scenario for gold would be inflation shooting much higher than expected, which would force investors to start pricing in a tighter monetary policy approach from the Fed. The resulting surge in US Treasury yields would dent gold's attractiveness, as market players would start switching to safe-haven assets, such as interest-bearing government bonds. In this case, gold would likely slide toward the $1,831/oz support level, with a break below likely causing a fall to the $1,800-1,818/oz range. Today, investors also await a speech by US Fed Chairman Jerome Powell. We expect him to stick to his dovish rhetoric, which should provide slight support for gold.