Commodities Daily - February 11, 2021

> Oil dips despite bullish inventory data; IEA and OPEC reports eyed. We will be interested to see whether the IEA and OPEC revised their 2021 US crude production estimates in their monthly reports today, as the EIA unexpectedly lowered its estimate earlier this week. In our view, the price risks today are generally skewed to the downside, as both the IEA and OPEC are unlikely to raise their demand forecasts for this year. The pause in the recent stock market rally could also encourage investors to take profits in Brent, which we think could retreat toward the $60.1-60.4/bbl range after peaking near resistance at $61.7/bbl.> Gold fails to hold above $1,853/oz resistance following downbeat US CPI data. Today, investors await the publication of updated economic forecasts for the eurozone and US weekly jobless claims. For the latter, we expect a figure close to the consensus forecast of 770k, which would continue the slight improvement from the previous week, but modest due to the January nonfarm payrolls data. We expect gold to stay in a $1,830-1,845/oz range on reduced trading volumes due to the start of the Lunar New Year in Asia.OIL DIPS DESPITE BULLISH INVENTORY DATA; IEA AND OPEC REPORTS EYEDAfter trading near $61/bbl early yesterday, front-month Brent inched higher and consolidated slightly above $61.5/bbl amid the release of the January US CPI data. Inflation was weaker than expected, forcing investors to reassess the premise of the so-called reflation trade. This halted the rally in stock markets and caused Brent to retreat to $61/bbl ahead of the weekly EIA inventory update. The EIA data showed a strong 6.65 mln bbl drop in US crude stocks to 469 mln bbl (the lowest since March) last week amid a 0.65 mln bpd decrease in imports to 5.86 mln bpd and a 0.15 mln bpd increase in refinery inputs to 14.8 mln bpd. A 0.87 mln bpd drop in exports to 2.62 mln bpd and a 0.1 mln bpd increase in US crude oil production to 11 mln bpd proved insufficient to offset the crude stock draw. Recall that the EIA indicated in its monthly outlook yesterday that it now expects US liquids production to rise 0.12 mln bpd this year but sees crude output falling 0.29 mln bpd (versus 0.19 mln bpd previously) to 11.02 mln bpd.The gasoline and distillate data was mixed. Gasoline stocks were up yet again, swelling 4.26 mln bbl to 256.4 mln bbl, while distillate stocks fell 1.73 mln bbl to 161.1 mln bbl. Refineries' capacity utilization continues to climb and has reached the highest level since early in the pandemic. Refiners are clearly adding to their stockpiles to get ready for an uptick in demand in the spring and summer. Gasoline demand, meanwhile, remained stuck below 8 mln bpd for a third straight week, with winter storms keeping people off the road in key parts of the US. As a result, gasoline stockpiles rose to the highest level since June, but they remain within the 2015-19 range for this time of the year. Diesel demand has been one bright spot. It remains robust and is at the highest level since last March. In particular, demand for industrial diesel, which is used in the trucking industry, has even risen above pre-pandemic levels amid the growth of e-commerce. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 11.17 mln bbl amid strong draws in propane stocks and the "other oils" category. The strong crude stock draw caused Brent to rise to an intraday high of $61.7/bbl before eventually settling at $61.47/bbl, fixing $0.38/bbl above the previous settlement. This morning, Brent is again trending lower, though it is holding above $61/bbl, which proved a fairly strong support level yesterday. Today, the IEA and OPEC will publish their monthly reports within hours of each other. Both will contain updated global supply and demand forecasts. Of particular interest will be the 2021 US crude production estimates, as the EIA unexpectedly lowered its estimate earlier this week. In our view, the price risks today are generally skewed to the downside, as both the IEA and OPEC are unlikely to raise their demand forecasts for this year. The pause in the recent stock market rally could also encourage investors to take profits in Brent, which we think could retreat toward the $60.1-60.4/bbl range after peaking near resistance at $61.7/bbl.GOLD FAILS TO HOLD ABOVE $1,853/OZ RESISTANCE FOLLOWING DOWNBEAT US CPI DATAGold climbed $20/oz to $1,855/oz yesterday morning, with most of the gains coming straight after the release of US CPI data for January, which came in at 1.4% y-o-y, slightly below the consensus of 1.5% and below the December number of 1.6%. The data caused investors to lose faith in a rapid US economic recovery amid growing confidence in the need for US fiscal stimulus. Gold advanced as US Treasury yields tumbled. Despite the muted January figure, some investors still expect inflation to pick up in the months ahead as US President Joe Biden is pushing for major stimulus and vaccination progress will allow restrictions to be eased, spurring consumer spending. Fed Chairman Jerome Powell yesterday said the US labor market remains far from a full recovery and called for additional financial support. He also assured investors that interest rates will remain low for some time to boost the economy and jobs growth. Later in the day, gold pared back almost all of its earlier gains amid fading expectations for a rapid US economic recovery and closed at $1,840/oz.As we write, gold is trending higher once again and is targeting $1,845/oz. Investors await the publication of updated economic forecasts for the eurozone. The report will show further plans to bolster the EU economy, which could impact the euro and bullion in turn given gold's high correlation with the single currency. US weekly jobless claims are also due today. We expect a figure close to the consensus forecast of 770k, which would be a slight improvement from the previous week but still fairly modest after last week's disappointing January nonfarm payrolls data. We expect gold to stay in a $1,830-1,845/oz range on reduced trading volumes due to the start of the Lunar New Year in Asia. The celebrations last as long as 16 days, but only the first seven days are considered public holidays in China (February 11-17). We think gold is unlikely to fall below the $1,830/oz support level today.