Commodities Daily - February 9, 2022

> Oil prices ease amid brightening prospects for Iranian nuclear deal; weekly US inventory data in focus. This morning, Brent continues to trade near $91/bbl, supported by last night's upbeat API inventory data, which showed declines in US crude oil, gasoline and distillate stocks. The weekly EIA inventory update is due this evening. Meanwhile, the ongoing negotiations over the Iranian nuclear deal continue to pose downside risks to the oil market - risks that could materialize at any moment if the deal is restored. We think that Brent is likely to remain under pressure today and that it could slide back to $90/bbl, as we believe the EIA report will be less upbeat than the API data released overnight.> Gold prices rise on the back of US macro releases. Gold edged up from $1,820/oz to $1,825/oz yesterday, while the 10y US Treasury yield climbed from 1.91% to 1.95%. Gold is trading near $1,825/oz as we write. Markets await speeches by Fed Governor Michelle Bowman and Cleveland Fed President Loretta Mester. We expect bullion to slide to support at $1,820/oz today.> Aluminum at 13-year high; iron ore down on Chinese regulator warning. Base metals traded mostly higher yesterday, with aluminum a strong outperformer as the lightweight metal hit a 13-year high after beating its recent, October 2021 peak. While there might be some profit taking in the short run, the market's fundamentals suggest that aluminum still has room to push higher in the medium term. Meanwhile, iron ore futures have taken a tumble on Chinese authorities' new warnings over "speculation."OIL PRICES EASE AMID BRIGHTENING PROSPECTS FOR IRANIAN NUCLEAR DEAL; WEEKLY US INVENTORY DATA IN FOCUSYesterday, Brent slid as much as $3/bbl, even briefly dipping below $90/bbl at one point, amid brightening prospects for the Iranian nuclear deal, although it later began to stabilize around $91/bbl. There was a lot of diplomatic chatter regarding the ongoing negotiations over the nuclear deal yesterday, including some fairly upbeat comments from top-level officials suggesting that the sides are closing in on a long-sought deal, which would lead to a resumption in official crude exports from Iran. We note that Iran and China coordinated their strategies heading into yesterday's resumed negotiations in Vienna, while Russian President Vladimir Putin indicated that his country's position was close to France's. The EU's foreign policy chief Josep Borrell said yesterday that the parties were "reaching the last steps" in the negotiations. When asked when a deal might be reached, Borrell said, "I don't know if it's one week, two weeks, three weeks." He was hopeful that an agreement will come within the next few weeks.Yesterday, investors were also digesting a monthly EIA report that was on the bearish side. The agency estimated that global oil inventories drew in January amid low OPEC production and expects further draws in February, but it projects that global stocks will start building up again in March and continue rising throughout 2022 (in our view, inventory builds are likely in January-April and November-December, with draws in the remaining months of 2022). The agency raised its forecast for Russian output in 2022. It also raised its projections for US production, now expecting an average level of 11.97 mln bpd this year (up from 11.8 mln bpd) and 12.6 mln bpd in 2023 (up from the previous estimate of 12.41 mln bpd and above the all-time high of 12.3 mln bpd in 2019). Front-month Brent eventually settled at $90.78/bbl, fixing $1.91/bbl below the previous settlement.This morning, Brent continues to trade near $91/bbl, supported by last night's upbeat API US inventory data, which showed declines in stockpiles of crude oil (-2 mln bbl), gasoline (-1.1 mln bbl) and distillates (-2.2 mln bbl). The EIA's weekly stockpile report is due this evening. Meanwhile, the ongoing negotiations over the Iranian nuclear deal continue to pose downside risks to the oil market - risks that could materialize at any moment if the deal is restored. We think that Brent is likely to remain under pressure today and that it could slide back to $90/bbl, as we believe the EIA report will be less upbeat than the API data released overnight, particularly with regard to refined LD PRICES RISE ON THE BACK OF US MACRO RELEASESGold edged up from $1,820/oz to $1,825/oz yesterday, while the 10y US Treasury yield climbed from 1.91% to 1.95%. Meanwhile, EUR/USD slid from 1.143 to 1.145. The NFIB US small business optimism index fell from 98.9 in December to 97.1 in January, slightly below consensus. The index provides a snapshot of conditions for US small businesses, which account for around half of private-sector jobs. The report noted that business owners are still facing supply-chain bottlenecks and labor market shortages, and also that they do not expect sales to grow significantly in 1Q22. It highlighted the uneven US economic recovery, hence providing tailwinds for bullion. Another positive factor for gold yesterday was a revision of the December US CPI data ahead of Thursday's January CPI publication - the Bureau of Labor Statistics raised its estimate of inflation in December from 0.5% to 0.6% m-o-m. The revision only added to the worries that the inflation risks remain high and that the Fed will have trouble reining in price growth.During the Asian trading session today, gold has held slightly above $1,825/oz. There are no significant macro releases on today's agenda. However, Fed Governor Michelle Bowman and Cleveland Fed President Loretta Mester are scheduled to speak. They will provide the first comments from Fed officials since Friday's surprisingly strong jobs report. We think they are likely to indicate that the economy is in good enough shape to tighten monetary policy more aggressively than previously planned in order to prevent inflation from rising further. If they do, gold would likely face pressure in the second half of the day and could slide to support at $1,820/oz. However, if they provide less hawkish remarks on inflation and Fed policy, gold could get a boost toward resistance around $1,830/oz ahead of tomorrow's January CPI report, which analysts expect to show inflation at a record high 7.3% UMINUM AT 13-YEAR HIGH; IRON ORE DOWN ON CHINESE REGULATOR WARNINGBase metals traded mostly higher yesterday, with nickel an exception. The 3m LME contract for copper was up 0.69% (+$33/tonne from the previous day's close) at $9,845/tonne, aluminum surged 2.97% (+$102/tonne) to $3,225/tonne and zinc was up 0.41% (+$15/tonne) at $3,640/tonne, while nickel lost 0.84% (-$187/tonne) to settle at $23,202/tonne.Thus, most base metals continued to demonstrate positive dynamics yesterday and aluminum remained a strong outperformer. The 3m LME contract for aluminum surged to its highest since 2008, touching $3,236/tonne at one point, higher than the recent, October 2021 high of $3,229/tonne. The next target level stands at $3,380/tonne, which would be an all-time high. We believe that there might be some profit taking at current levels (technical indicators suggest that aluminum is now in overbought territory) before the price goes higher. In any case, the tight market amid deficits both in and outside of China provide a solid basis for the lightweight metal to test new highs this year.Iron ore futures in Singapore have fallen 6% to $144/tonne as we write versus the Tuesday intraday high of $153/tonne. The dive came as the Chinese authorities warned information providers against "false price disclosures" - the second warning against speculation in the market. The price could rebound amid the tight seaborne supply in the short term, but we think the Chinese regulator is likely to stick to its intention to "crack down on speculation," which will remain the key negative driver for iron ore futures in the medium term. Chinese lending data is due to come out this week, with potential easing measures to add support for the iron ore