Commodities Daily - February 25, 2021

> Oil rises after EIA inventory data as stocks climb, dollar weakens. This morning, Brent continues to hover above the $67/bbl mark, still supported by the bullish EIA report and Powell's pledge to continue supporting the US economy. Today, investors will eye the Urals loading program for March from Russia and January durable goods orders, initial jobless claims and a second reading of 4Q20 GDP from the US. Brent may break above the $67.6/bbl resistance level and rise into the $68.1-68.6/bbl range today, while an unlikely break below support at $67/bbl could cause a fall to $66.5/bbl.> Gold pulls back while US Treasury yields keep rising. Today will see the release of US durable goods orders for January, weekly initial jobless claims, consumer confidence and eurozone business confidence. We expect bullion to slide just below $1,795/oz today, which could pave the way to $1,761/oz. We are skeptical that gold will be able to retest the $1,815/oz resistance level.OIL RISES AFTER EIA INVENTORY DATA AS STOCKS CLIMB, DOLLAR WEAKENSAfter trading near $65/bbl early yesterday, front-month Brent began to generate positive momentum, rising to $66/bbl mid-way into the European trading session as investors took in Fed Chairman Jerome Powell's testimony before a House committee. Powell said that the US economy still had a ways to go before reaching maximum employment and the Fed's inflation target, a sign that the central bank intends to maintain an accommodative stance. Powell also pushed back against concerns of rising prices, especially among equity investors, who are anticipating a post-pandemic surge in economic activity that would require a more hawkish stance and higher interest rates, thus lessening the appeal of stocks. His remarks supported stock markets (with which oil prices have been strongly correlated for months now) and pressured the dollar, helping Brent rally toward $66.7/bbl ahead of the EIA inventory report.The weekly EIA update showed a 1.29 mln bbl increase in US crude stockpiles to 463 mln bbl last week amid a 2.6 mln bpd drop in refinery inputs to 12.23 mln bpd and a 1.55 mln bpd decline in exports to 2.3 mln bpd. A 1.3 mln bpd decrease in imports to 4.6 mln bpd and 1.1 mln bpd drop in US crude production to 9.7 mln bpd were insufficient to offset the crude stock build. US oil production fell further than expected, though most of this lost supply is expected to come back online this week as power is restored and wells restart in the Permian Basin. We also note that the drop in refinery inputs was the second largest on record, trailing only the drop-off triggered by Hurricane Harvey. US refinery runs slumped to their lowest level since 2008. The crude stock build resulted from both supply and demand shocks caused by the cold weather, though demand has taken a bigger hit than supply, a trend that is likely to hold for a couple of weeks.The refined product data was mostly bullish, with gasoline stocks up 0.01 mln bbl to 257.1 mln bbl, while distillate stocks fell 5 mln bbl to 152.7 mln bbl. Gasoline demand fell sharply because of the storm, down more than 1 mln bpd to 7.2 mln bpd. Diesel demand was off too, falling below 4 mln bpd for the first time since mid-January. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) plunged 13.8 mln bbl amid strong draws in propane stocks and "other oils." The positive takeaways from the EIA report pushed Brent to as high as $67.3/bbl yesterday, and it eventually settled at $67.04/bbl, fixing $1.67/bbl above the previous settlement.This morning, Brent continues to hover above the $67/bbl mark, still supported by the bullish EIA report and Powell's pledge to continue supporting the US economy. Today, investors will eye the Urals loading program for March from Russia and January durable goods orders, initial jobless claims and a second reading of 4Q20 GDP from the US. Brent may break above the $67.6/bbl resistance level and rise into the $68.1-68.6/bbl range today, while an unlikely break below support at $67/bbl could cause a fall to $66.5/bbl.GOLD PULLS BACK WHILE US TREASURY YIELDS KEEP RISINGYesterday morning, gold was trying to pare back some of this week's losses and attempting to hold above the $1,810/oz mark. However, it slipped to $1,785/oz following the opening in New York, as the US 10y Treasury yield climbed to 1.4%. The 10y real yield, which strips out inflation, is seen as a pure read for the economy's growth prospects and is the metric that gold investors primarily follow, rose to -0.78% from -0.84%. Rising US Treasury yields erode the appeal of non-yielding gold. US new home sales increased more than expected in January, indicating a recovery amid the substantial money liquidity in the US economy that is boosting inflation expectations and thereby implying tighter monetary policy. Yesterday's main event was Fed Chair Jerome Powell's testimony before the US House of Representatives' financial services committee. He said the Fed's 2% inflation target would only likely be reached in three years' time, while he also reaffirmed that ultra-soft monetary policy would remain in place. This helped to temporarily curb the rise in yields and prompted the dollar to give back some of its gains, providing a slight tailwind for gold, which rebounded to $1,805/oz.Gold remains under pressure near the $1,795/oz support level as we write. Today will see the release of US durable goods orders for January, weekly initial jobless claims, consumer confidence and eurozone business confidence. The European data is likely to be upbeat as the vaccination figures are improving (almost 6.5% of the EU population has been vaccinated), which is supporting EUR/USD and thus gold. The US weekly jobless claims data is likely to have been impacted by the cold weather, and we expect an increase in unemployment applications. We expect bullion to slide just below $1,795/oz today, which could pave the way to $1,761/oz. We are skeptical that gold will be able to retest the $1,815/oz resistance level.