Commodities Daily - January 13, 2021

> Oil prices surge ahead of EIA US weekly inventory update. In addition to the EIA weekly inventory update, today's agenda includes US December CPI data and Fed's Beige Book. In our view, the EIA data is likely to show a modest draw in crude oil stocks of around 1 mln bbl (contrary to the 5.8 mln bbl draw reported by the API overnight) with expected bearish refined product data providing headwinds for Brent. Thus, the factors that have boosted Brent this morning to $57.40 -the bigger than expected US oil inventory draw reported by the API, negative dollar momentum and growing risk appetite - will at best support it to trade within a $57.8-58.2/bbl range during the first half of the day today, in our view. However, the EIA weekly inventory update later in the day carries downside risks and could even push Brent lower to test the $56.70/bbl support level. According to Brent and WTI technicals, the rally is also looking limited, with prices having surged into overbought territory, signaling a correction is due.> Gold prices stabilize as dollar weakens, US CPI print on the radar. Today, investors will eye a variety of other US data, including December CPI and the Fed Beige Book. We think the former is likely to be lifted by an unusual December increase in gasoline prices, but only slightly. In our view, the economic slack in general and labor-market slack in particular will keep suppressing any sustained pickup in price pressure for a few months. This should give the Fed a long runway before it will need to legitimately contemplate reducing economic support. Fed guidance is now being the single key factor behind the gold price dynamic. Thus, in the current circumstances, subdued inflation data should counterintuitively be supportive for gold. Similar to early yesterday, this morning gold is also struggling to break above the $1,861/oz resistance mark. If it eventually succeeds we think that further gains will be limited to $1,869/oz, while the support is at $1,833/oz.OIL PRICES SURGE AHEAD OF EIA US WEEKLY INVENTORY UPDATEAfter hovering above the $55.50/bbl mark at the start of the day yesterday, front-month Brent began to generate positive momentum and consolidated around the $56.50/bbl mark during European and US trading hours. It settled at $56.58/bbl, fixing $0.92/bbl above the previous settlement. During the Wall Street session, investors were eying the release of the EIA's monthly oil market report, which turned out generally downbeat. Following the recent surge in oil prices and uptick in the US active oil rig count, the agency now forecasts that US crude oil production will fall just 0.19 mln bpd in 2021 (versus a 0.24 mln bpd fall expected previously) to an average of 11.10 mln bpd. Also on the bearish side was the EIA's 0.39 mln bpd downgrade to its previous forecast for 2021 global demand, which is now seen averaging 97.7 mln bpd, up from 92.21 mln bpd expected in 2020. Overnight, the API reported a 5.8 mln bbl draw in US crude stocks last week to 484.5 mln bbl. This came amid a 0.10 mln bpd increase in refinery inputs and despite a 0.09 mln bpd increase in imports. Crude oil stocks at Cushing fell 0.23 mln bbl. The refined product data was bearish, however, showing a 1.9 mln bbl increase in gasoline stocks and a 4.4 mln bbl build in distillate stocks. The EIA inventory report is due today at 18:30 Moscow time. The Bloomberg consensus is for a 3.0 mln bbl crude stock draw, a 2.5 mln bbl increase in gasoline stocks and a 2.0 mln bbl increase in distillate stocks. We note that holiday travel did little to support gasoline demand, which last week was reported at the lowest level since early in the pandemic. (Another highlight in last week's report was that the US did not import any Saudi crude for the first time in 35 years.)In addition to the EIA weekly inventory update, today's agenda includes US December CPI data and the Fed's Beige Book. In our view, today's EIA data is likely to show a modest draw in crude oil stocks of around 1 mln bbl (contrary to the 5.8 mln bbl draw reported by the API overnight), with expected bearish refined product data providing headwinds for Brent prices, as more restrictive virus measures in several parts of the US are still weighing heavily on consumption. Thus, the factors that have boosted Brent this morning to $57.40/bbl - the bigger than expected US oil inventory draw reported by the API, negative dollar momentum and growing risk appetite - will at best support it to trade within a $57.8-58.2/bbl range during the first half of the day today. However, the EIA weekly inventory update later in the day carries downside risks and could even push Brent lower to test the $56.70/bbl support level. We consider it important to highlight that the current positive momentum has come despite Japan preparing to expand its state of emergency as a virus outbreak in China appears to be worsening. According to Brent and WTI technicals, the rally is also looking limited, with prices having surged into overbought territory, signaling a correction is due.GOLD PRICES STABILIZE AS DOLLAR WEAKENS, US CPI PRINT ON THE RADARYesterday, recently prominent themes continued to dominate news flow, like the future of US stimulus and its implications, rich valuations, negative coronavirus news flow (from the UK, Germany and Japan in particular yesterday), and the end of the Trump presidency in the US. Gold prices, meanwhile, traded sideways within the $1,840-1,860/oz range during the day, showing a second consecutive day of stability after plummeting last week from $1,960oz toward $1,820/oz on surging US Treasury yields. Following strong gains in recent days, the dollar corrected early yesterday, which supported gold. This comes against a backdrop of expectations of new fiscal stimulus from the Biden administration, details of which are expected tomorrow. In the evening, meanwhile, the dollar weakened after 10y US Treasury yields started to drop, falling from a recent high of 1.18% down to 1.12%, which is also gold-price supportive. This was likely attributable to comments from Fed officials James Bullard and Eric Rosengren, who in somewhat of a departure from the remarks of their colleagues, said that the US economy was still in recovery mode and that it was premature to discuss winding down QE. This pushed the dollar 0.5-1.0% lower against most main currencies.Today, investors will eye a variety of other US data, including December CPI and the Fed Beige Book. We think the former is likely to be lifted by an unusual December increase in gasoline prices, but only slightly. In our view, the economic slack in general and labor-market slack in particular will keep suppressing any sustained pickup in price pressure for a few months. This should give the Fed a long runway before it will need to legitimately contemplate reducing economic support. Fed guidance is now being the single key factor behind the gold price dynamic. Thus, in the current circumstances, subdued inflation data should counterintuitively be supportive for gold. Also note that today ECB President Christine Lagarde is scheduled to make remarks and the US House of Representatives is likely to vote on terms of impeachment against outgoing President Donald Trump. Similar to early yesterday, this morning gold is also struggling to break above the $1,861/oz resistance mark. If it eventually succeeds we think that further gains will be limited to $1,869/oz, while the support is at $1,833/oz.