Commodities Daily - January 14, 2021

> Oil slides amid mixed EIA report, stronger dollar, OPEC secretary general's comments; OPEC monthly report eyed. Today, investors will eye the OPEC monthly report, weekly US jobless claims and speeches from Fed Chairman Jerome Powell and US President-elect Joe Biden. In our view, oil prices are likely to remain under pressure today amid dollar headwinds and what we expect to be a downbeat report from OPEC, with yet another round of downgrades to 2021 demand estimates in light of the deteriorating coronavirus situation. We think that Brent is likely to slide into the $55.2-55.6/bbl range later today, having broken through support at $56.2/bbl.> Gold slides on another wave of dollar strengthening; Fed chair comments eyed. Gold is trading lower as we write ahead of today's speech by Fed Chairman Jerome Powell, who will likely confirm that ultra-soft monetary policy will remain in place for the foreseeable future. Markets also await the release of Joe Biden's fiscal stimulus plan. These two events could provide significant support for gold today, so we think it could rebound back toward the $1,861/oz resistance mark. Should it manage to overcome this level, we think further gains would be limited to $1,869/oz, with support still at $1,833/oz.OIL SLIDES AMID MIXED EIA REPORT, STRONGER DOLLAR, OPEC SECRETARY GENERAL'S COMMENTS; OPEC MONTHLY REPORT EYEDAfter rallying to an intraday high of $57.4/bbl early yesterday, front-month Brent began to slide toward $56.5/bbl as the dollar strengthened, without any other clear triggers. Midway into the European trading session, Brent dipped $1/bbl to $55.8/bbl after OPEC Secretary General Mohammad Barkindo commented that oil stocks were stubbornly high, with OECD inventories more than 160 mln bbl above their five-year average. He noted that crude inventories were a "key issue of market imbalance," and also that the "worst is over for the oil market" but that OPEC must continue to hold monthly meetings to ensure that it doesn't relapse into the huge imbalances seen last year. We note that the IEA's preliminary stockpile data for November (the latest available data, released in mid-December) showed that total OECD stocks (crude oil and refined products combined) fell by 24 mln bbl to 3,104 mln bbl during the month. If confirmed by the final estimates, this would lower the total overhang versus the five-year average by 21 mln bbl to around 163.5 mln bbl, though it would keep the crude-only overhang unchanged at 60 mln bbl. This seems to be what the OPEC secretary general was getting at, but the markets should have been aware of these trends for some time, which makes the $1/bbl correction seem rather overdone.Ahead of the weekly EIA inventory report, Brent was trading near $56/bbl. The data showed a 3.25 mln bbl draw in US crude stocks to 482.2 mln bbl last week, amid a 0.62 mln bpd drop in exports to 3.01 mln bpd and a 0.27 mln bpd rise in refinery inputs to 14.65 mln bpd. A 0.87 mln bpd rise in imports to 6.24 mln bpd was insufficient to prevent a stock draw, while US crude production remained flat at 11.0 mln bpd. The decrease in crude stocks boosted sentiment, pushing Brent $0.5/bbl higher following the release. The EIA's gasoline and distillate data, however, was bearish. Gasoline stocks surged 4.4 mln bbl to 245.5 mln bbl and distillate stocks swelled 4.8 mln bbl to 163.2 mln bbl. This tempered the optimism, and Brent retreated to $56/bbl later in the day. We note that total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 9.43 mln bbl amid a 6.7 mln bbl draw in propane stocks and an 8 mln bbl draw in the "other oils" category.This morning, Brent dipped below $56/bbl after China reported its biggest jump in Covid-19 cases in more than 10 months, which pointed to growing risks ahead of the upcoming holiday period, when hundreds of millions of people usually travel. Meanwhile, this morning's Chinese customs data showed that China imported 9.06 mln bpd of crude oil in December, down from November's 11.04 mln bpd. In our view, however, crude arrivals should firm up going forward given that import quotas were recently raised to 18% above the 2020 levels, according to Reuters. Today, investors will eye the OPEC monthly report, weekly US jobless claims, and speeches from Fed Chairman Jerome Powell and US President-elect Joe Biden. In our view, oil prices are likely to remain under pressure today amid dollar headwinds and what we expect to be a downbeat report from OPEC, with yet another round of downgrades to 2021 demand estimates in light of the deteriorating coronavirus situation. We think that Brent is likely to slide into the $55.2-55.6/bbl range later today, having broken through support at $56.2/bbl. The losses are likely to be limited, however, as Fed Chairman Jerome Powell will probably confirm that the Fed's ultra-soft monetary policy will remain in place for the foreseeable future. This should provide support to risk assets, along with Biden's likely announcement of a massive fiscal stimulus package.GOLD SLIDES ON ANOTHER WAVE OF DOLLAR STRENGTHENING; FED CHAIR COMMENTS EYEDGold opened near $1,860/oz yesterday before coming under pressure from dollar momentum, especially against DM currencies, with no clear trigger. It initially slid to $1,850/oz before trading sideways within a $1,850-1,860/oz range. The correction was curbed by a downward shift in long-dated US Treasury yields (the 10y shed 4 bps to 1.08%, 10 bps off the recent local high). Yesterday's US inflation report delivered no surprises: December inflation came in at 0.4%, while core inflation stood at 0.1%. Meanwhile, St Louis Fed President James Bullard reiterated that it was premature to talk about when monetary policy might be tightened. He added that the Fed was prepared to adhere to a less cautious stance than in the past and was willing to let inflation climb for a period.This morning, gold finally gave way to the dollar momentum and slid to $1,840/oz as US Treasury yields briefly spiked. This came ahead of today's speech by Fed Chairman Jerome Powell, who will likely confirm that ultra-soft monetary policy will remain in place for the foreseeable future. Markets also await the release of Joe Biden's fiscal stimulus plan. These two events could provide significant support for gold today, so we think it could rebound back toward the $1,861/oz resistance mark. Should it manage to overcome this level, we think further gains would be limited to $1,869/oz, with support still at $1,833/oz. A sharp correction below $1,833/oz would likely pave the way to the $1,797-1,819/oz range.