Commodities Daily - February 5, 2021

> Oil keeps rising along with stock markets as vaccination rollout fuels hopes of further global recovery. Today, investors will eye US January nonfarm payroll data and the Baker Hughes rig counts. We think Brent will likely rise to within the $59.6-60.1/bbl range later today amid an upbeat US monthly employment report (recently released US labor market data all pointed to a further recovery). Support is at $59/bbl, with a break below likely causing a fall into the $58.5-58.8/bbl range.> Gold dips below $1,800/oz on further rise in US Treasury yields and dollar strength; US nonfarm payrolls eyed. Gold's 50d MA is sliding toward the 200d MA and appears set to break below it, forming a so-called death cross, a technical pattern that signals further losses. The next support level for gold stands at $1,783/oz, which could be tested by upbeat nonfarm payrolls data today, which could provide an additional tailwind for the dollar. The next resistance level is now at $1,801/oz, with a further gain to $1,818/oz unlikely, in our view.OIL KEEPS RISING ALONG WITH STOCK MARKETS AS VACCINATION ROLLOUT FUELS HOPES OF FURTHER GLOBAL RECOVERYDuring first half of the day yesterday, front-month Brent was trading within a narrow $58.5-59.0/bbl range before starting to slide toward $58/bbl. The shift lower came amid further gains in the dollar, with EUR/USD yesterday breaking below 1.2 and sliding to 1.195 (the pair was trading at 1.214 at the beginning of this week). One of the catalysts was yet another upbeat weekly US jobless claims print. This disparity in economic performance between the US and Europe and the US currently leading Europe in vaccination rates are two key factors weighing on the European currency. The recent upbeat macro data from the US (including labor market data) strongly points to the fact that ramping-up vaccination does facilitate economic recovery. Investors are now pricing in a further normalization in the global economy as vaccine distribution continues to progress. Global stock market indexes kept rallying throughout yesterday's Wall Street session, which helped Brent recoup earlier losses.Another factor supporting prices yesterday was Saudi Arabia's defying market expectations and leaving its selling prices for March unchanged for Asian customers. This means that Saudi Aramco prices for Asia are to remain at the highest levels since at least September, while prices for all of its crude grades for buyers in the US and Europe will be raised. Brent ended up settling at $58.84/bbl yesterday, fixing $0.38/bbl above the previous settlement. We also note that this year's oil price rally is accompanied by a surge in open interest in both Brent and WTI to the highest level since last May, which implies growing investor interest for this market (investors have been entering the market a brisk clip). This comes against the backdrop of a very upbeat 2H21 oil market outlook: demand is expected to grow strongly and substantially exceed supply. Given that there are few long-term supply projects coming on line while tailwinds from the extensive fiscal and monetary stimulus measures remain in place, many even foresee one of the best commodities cycles in recent memory. However, any sharp rebound in supply could put a dent in the oil rally. Spare capacity is plentiful, as OPEC+ is now withholding around 7 mln bpd, Iran has the potential to deliver around 2 mln bpd if oil sanctions are lifted and US shale could add around 1.5 mln bpd if prices rise further.Today, investors will eye US January nonfarm payroll data and the Baker Hughes rig counts. We think Brent will likely rise to within the $59.6-60.1/bbl range later today amid an upbeat US monthly employment report (recently released US labor market data all pointed to a further recovery). Support is at $59/bbl, with a break below likely causing a fall into the $58.5-58.8/bbl range.GOLD DIPS BELOW $1,800/OZ ON FURTHER RISE IN US TREASURY YIELDS AND DOLLAR STRENGTH; US NONFARM PAYROLLS EYEDGold slid almost $50/oz to a nine-week low of $1,785/oz yesterday, although it managed to claw its way back to $1,795/oz later. Silver fell $1/oz and briefly broke below $26/oz. Weighing on both metals was a further decline in EUR/USD (which is now on its way toward 1.195, having traded at 1.214 at the start of the week) and a 2 bp rise in the 10y US Treasury yield. Yesterday's US jobless claims data was upbeat, showing a decline in claims for the fourth week in a row. Strong US data and the rising vaccination rate (around 10% of Americans have now received a jab) continue to assure investors of a solid recovery in the US this year. The eurozone vaccination rate is much more modest, at only 3% of the population. US President Biden yesterday adopted a tough approach toward China, asserting that the US will confront China's "economic abuses" and seek to defend human rights. In recent years, US-China tensions have largely been positive for the dollar. Expectations of further money supply injections into the US economy via fiscal support and direct payments are causing investors to price in a more hawkish long-term monetary policy, which is driving US 10y Treasury yields higher. Gold and silver have registered modest gains as we write, with bullion seemingly on course to break above $1,800/oz. Today will see the release of the January US monthly employment report, which usually lifts volatility in gold and silver. We anticipate an upbeat report following recent positive US labor market data, including Wednesday's ADP report. Gold's 50d MA is sliding toward the 200d MA and appears set to break below it, forming a so-called death cross, a technical pattern that signals further losses. The next support level for gold stands at $1,783/oz, which could be tested by upbeat nonfarm payrolls data today, which could provide an additional tailwind for the dollar. The next resistance level is now at $1,801/oz, with a further gain to $1,818/oz unlikely, in our view.