Commodities Daily - February 12, 2021

> Oil ticks lower amid IEA and OPEC reports as global stock rally eases. There is little on today's macro agenda, so focus will be on the weekly Baker Hughes rig count update. Oil has been gradually losing support from equity markets, which have steadied after their recent advance, while the dollar's negative momentum is easing. We think investors may continue to book profits following the recent rally in Brent, which is still technically overbought and in our view likely to slide into the $60.1-60.4/bbl range later today.> Gold slides as UST yields climb amid mixed US and eurozone data. Bullion is under pressure as we write and has dipped just below $1,820/oz. Today, investors await the Michigan consumer sentiment index for February. Having failed to break above resistance at $1,853/oz earlier this week, gold is likely to break below $1,818/oz today and could even test support at $1,801/oz, in our view. We think a further break below to $1,783/oz is unlikely.OIL TICKS LOWER AMID IEA AND OPEC REPORTS AS GLOBAL STOCK RALLY EASESAt the start of the day yesterday, front-month Brent was hovering above $61/bbl as oil investors awaited the release of the monthly IEA oil market report. Like the EIA's report last week, the IEA's new market outlook contained a downward revision to its global oil demand estimate for this year (down 0.8 mln bpd to 96.44 mln bpd, still up from the 91.01 mln bpd average in 2020). The IEA's downward revisions to demand forecasts were attributed to a resurgence in Covid-19 cases and setbacks in the vaccine rollout, which have constrained the demand recovery. Estimates were lowered for India and most OECD countries, led by Europe and Canada, though the forecast for China was raised. The agency expects global demand to average 98.55 mln bpd in 2H21, 4.25 mln bpd more than in 1H21, as the vaccine rollout should speed up the recovery as the year goes on. This implies that demand will substantially exceed supply in 2H21, leading to steeper declines in global inventories, which would give OPEC+ the opportunity to bring back around 1.5 mln bpd of production, plus the 1 mln bpd in voluntary Saudi cuts, from the 7.2 mln bpd currently offline. The IEA's non-OPEC supply estimate for 2021 was raised 0.4 mln bpd, as higher oil prices and a tighter market point to more drilling and completions in North America this year. US liquids production led the upward supply revisions, though not to an extent that would threaten the upbeat 2H21 outlook (the reason very few investors are willing to short the oil market). Preliminary data for January also showed that total OECD stocks fell by 24.8 mln bbl to 3,039 mln bbl, defying the seasonal trend. If this is confirmed, it would reduce the total overhang relative to the five-year average by 60 mln bbl to 78.7 mln bbl.The IEA's lowered demand projections weighed on Brent, which dipped below $61/bbl ahead of the monthly OPEC report. Unlike the EIA and IEA, OPEC raised its global oil demand estimate for this year (by 0.14 mln bpd to 96.05 mln bpd, up from 90.26 mln bpd in 2020). OPEC's 1H21 demand forecasts were lowered due to the reintroduction of Covid-19 restrictions, but the 2H21 figures were raised, as government stimulus is expected to provide a boost. Also unlike the EIA and IEA, OPEC lowered its forecast for non-OPEC supply this year (by 0.2 mln bpd). The supply estimates for the US and Asia were lowered, while the forecast for Canada was lifted. The upbeat OPEC report pushed Brent to an intraday high of $61.5/bbl, though the benchmark slid during a choppy session for the US stock market and eventually settled at $61.14/bbl, fixing $0.33/bbl below the previous settlement.Brent dipped below $61/bbl this morning and is currently trading near $60.7/bbl. There is little on today's macro agenda, so focus will be on the weekly Baker Hughes rig count update. Oil has been gradually losing support from equity markets, which have steadied after their recent advance, while the dollar's negative momentum is easing. We think investors may continue to book profits following the recent rally in Brent, which is still technically overbought and in our view likely to slide into the $60.1-60.4/bbl range later today.GOLD SLIDES AS UST YIELDS CLIMB AMID MIXED US AND EUROZONE DATAGold was trading sideways at $1,835-1,845/oz yesterday morning but began to retreat in early US trading and eventually slipped to $1,825/oz. This coincided with a tick lower in EUR/USD during the Wall Street session. Most importantly, however, US Treasuries shrugged off yesterday's disappointing US jobs data, though yields did begin to rise ahead of the 30y auction and also on headlines that progress was being made on the fiscal stimulus package. The 10y yield rising from 1.13% to 1.16% was the main reason for the correction in gold. The House Ways and Means Committee yesterday approved measures providing $593.5 bln in benefits, mainly consisting of $1,400 stimulus payments to all American adults. A full vote on the overall package will take place during the last week of February.An updated eurozone GDP forecast also weighed on gold. The European Commission now expects growth of 3.8% in both 2021 and 2022, versus its previous forecasts of 4.2% and 3%, respectively. The stronger the eurozone's growth, the higher that EUR/USD is likely to trend, which is very important in terms of further support for gold. Meanwhile, US jobless claims came in worse than expected as the country continued to struggle with the pandemic. Economists expect job growth to pick up in the spring amid vaccine distribution and stimulus efforts.In Asia, the Lunar New Year celebrations continue, with investors focusing on gold's seasonal physical demand prospects. Chinese gold consumption slumped 27% last year, according to the World Gold Council. This time last year, Shanghai Exchange prices were running at a record $69/oz discount to the LBMA price, though the situation has normalized since then: the usual Shanghai premium to LBMA has returned and ahead of the holidays was fluctuating between $0.50-5.00/oz amid the seasonal increase in consumption. The WGC is anticipating strong physical gold demand in China in 3Q21.Bullion is under pressure as we write and has dipped just below $1,820/oz. Today, investors await the University of Michigan consumer sentiment index for February. Having failed to break above resistance at $1,853/oz earlier this week, gold is likely to break below $1,818/oz today and could even test support at $1,801/oz, in our view. We think a further break below to $1,783/oz is unlikely.