Commodities Daily - February 18, 2021

> Oil keeps trading near recent highs as US weather removes more crude supply. This morning, Brent has broken above the $65/bbl mark following the overnight API report showing a strong draw in US crude stocks and amid the continuing US energy crisis. Today, we expect the EIA inventory report for the week ending February 12 (it will not capture the impact of the weather) to be on the bullish side, though we see a smaller crude stock draw than that reported by the API, along with a build in gasoline stocks and a draw in distillates. Today's agenda also includes the ECB meeting minutes, while the US sees housing starts and jobless claims. In our view, today Brent could advance into the $66.0-66.5/bbl range. Support is now at $65.15/bbl, with an unlikely break below opening the path toward the $64.3-64.7/bbl range.> Gold retreats following very positive US data; ECB meeting minutes eyed. Major data releases that could impact gold today include US housing starts and jobless claims and the ECB monetary policy meeting minutes. A few weeks ago, ECB officials expressed concern about the euro strengthening and allowed for the possibility of an easing of monetary policy despite the current negative rates. If these intentions are confirmed by the minutes, the euro will continue to weaken today, taking gold down with it. In this case, we think gold could drop all the way to test $1,765/oz, which is a very strong support level, with an unlikely break below signaling a bearish trend.OIL KEEPS TRADING NEAR RECENT HIGHS AS US WEATHER REMOVES MORE CRUDE SUPPLYAfter briefly sliding to $62.8/bbl at the start of the day yesterday, front-month Brent began to generate positive momentum and midway into the European session was already trading near $64.7/bbl. In the early minutes of the US session, however, it tumbled $1.5/bbl amid a dip in the S&P 500 at the open, while a continuing slide in EUR/USD also took its toll. The prospect of rising inflation after the US January PPI posted its biggest monthly increase since 2009 and upbeat US retail sales tempered optimism on global markets driven by hopes for an economic recovery after vaccinations. Oil investors also were eyeing OPEC+ related news ahead of the policy-setting meeting set for March 4-5. Yesterday, the Saudi energy minister said that producers must remain "extremely cautious" and called the next OPEC+ move "unpredictable." The two key questions for the group will be whether Saudi Arabia rolls back its voluntary cut of 1 mln bpd (which is due to end next month) and whether there will be an additional increase in supply from the whole group. The energy crisis in the US continues to dominate oil market headlines, with freezing temperatures now halting over 4 mln bpd or more of crude oil output, Bloomberg reported, citing traders and industry executives. Brent calendar spreads promptly moved further into a backwardation, reflecting the tightening global supply backdrop. Meanwhile, WTI calendar spreads flipped into contango on Tuesday and remain there as investors anticipate stronger refinery disruptions than the supply disruptions in the oil market. Yesterday, front-month Brent eventually settled at $64.34/bbl, fixing $0.99/bbl above the previous settlement. Overnight, the API reported a 5.8 mln bbl draw in US crude stocks last week to 468.0 mln bbl. This came amid a 0.07 mln bpd increase in refinery inputs and a 0.03 mln bpd increase in imports. Crude oil stocks at Cushing fell by 3.0 mln bbl. The refined product data was mixed, showing a strong 3.9 mln bbl increase in gasoline stocks and a 3.5 mln bbl draw in distillate stocks. The EIA weekly inventory report is due today at 19:00 Moscow time (later than usual due to the US holiday on Monday). The Bloomberg consensus is for a 2.15 mln bbl crude stock draw, a 1.50 mln bbl increase in gasoline stocks and a 1.55 mln bbl decrease in distillate stocks. This morning, Brent has broken above the $65/bbl mark following the overnight API report showing a strong drop in US crude stocks and amid the continuing US energy crisis. Today, we expect the EIA weekly inventory report for the week ending February 12 (it will not capture the impact of the weather) to be on the bullish side, though we see a smaller crude stock draw than reported by the API, along with a build in gasoline stocks and a draw in distillates. Today's agenda also includes the ECB meeting minutes, while the US sees housing starts and jobless claims. In our view, today Brent could advance into the $66.0-66.5/bbl range. Support is now at $65.15/bbl, with an unlikely break below opening the path toward the $64.3-64.7/bbl range.GOLD RETREATS FOLLOWING VERY POSITIVE US DATA; ECB MEETING MINUTES EYEDGold consolidated around $1,790/oz yesterday morning but in early US trading it slipped to $1,775/oz before later declining to $1,770/oz, its lowest intraday level since November 30. EUR/USD descended in a similar fashion, retreating 1.211 to 1.204 during the day. Following their recent rise, 10y US Treasury yields slid from 1.3% to 1.275%, which curbed the losses for gold.Yesterday's main highlight was upbeat US economic data for January. Retail sales surged 5.3% last month after dropping 1.0% in December, revealed significant purchasing power among the population. This suggests that a further relaxation of coronavirus restrictions could push up spending and cause a further increase in inflation expectations. Meanwhile, the US PPI jumped 1.3% last month, its biggest monthly gain since December 2009. Increasing economic activity is starting to nudge up inflation, driving 10y US Treasury yields higher as investors price in tighter monetary policy. Higher inflation expectations should keep real 10y US Treasury yields low for a few months, limiting the negative impact of rising nominal yields on gold. The release of the FOMC minutes provided some support for gold yesterday, as they reassured investors that monetary policy will not change anytime soon. One reason for this is that millions of Americans remain unemployed. Although infection and hospitalization rates have declined, new strains still pose a risk to the economy fully reopening.Gold is trying to pare back yesterday's losses as we write and is wrestling with the $1,785/oz resistance level. Major data releases that could impact gold today include US housing starts and jobless claims and the ECB monetary policy meeting minutes. A few weeks ago, ECB officials expressed concern about the euro strengthening and allowed for the possibility of monetary policy easing despite the current negative rates. If such intentions are confirmed in the minutes, the euro will continue to weaken today, taking gold down with it. In this case, we think gold could drop all the way to test $1,765/oz, which is a very strong support level, with an unlikely break below signaling a further bearish trend. Further losses look likely as gold's 50d MA has retreated below its 200d counterpart, forming a so-called death cross.