Commodities Daily - January 21, 2021

> Oil slides amid API-reported oil and product inventory builds, stronger dollar. Dollar gains yesterday weighed on oil prices during the US session, despite positive stock market momentum, while a bearish API report overnight provided additional headwinds. Investors are now focused on Biden's commitment to ending new oil and gas leasing of federal lands, his announcement of the US returning to the Paris climate agreement and also a move to block the $9 bln Keystone XL oil pipeline. Today, investors will eye the ECB decision, eurozone January consumer confidence, December US housing starts, weekly jobless claims and the Philadelphia Fed manufacturing survey. In our view, Brent is likely to remain under pressure today, likely sliding to the $55.2/bbl support level, which would open the door for a drop toward this month's low of $54.5/bbl.> Gold surges as US Treasury yields slide and stock market indexes rise. Today, investors await an ECB rate decision and an EU leaders' summit. The markets are not anticipating any significant changes in monetary policy, but the bank could signal it is ready to expand its stimulus measures this spring given the recent tightening of lockdown measures across Europe. This would provide a boost for risk assets today. Data releases include eurozone consumer confidence and US building permits, housing starts and jobless claims. After yesterday's rally, gold is now targeting resistance at $1,884/oz, with a break above paving the way to $1,902/oz.OIL SLIDES AMID API-REPORTED OIL AND PRODUCT INVENTORY BUILDS, STRONGER DOLLARDuring the first half of the day yesterday, Brent extended the positive momentum from Tuesday and close to the Wall Street open peaked at $56.64/bbl before starting to slide. During the US session, it gave up all of the earlier gains, sliding to an intraday low of $55.66/bbl. This was a somewhat delayed reaction to substantial dollar gains during European trading hours, when the outlook for the incoming Biden administration was in focus. This also came despite benchmark global equity indexes rising to record highs in anticipation of further US stimulus under the Biden administration. President Biden yesterday announced his White House's commitment to return to the Paris Agreement climate agreement, with other highlights being the revocation of an important permit for TC Energy's Keystone XL oil pipeline from Canada and a moratorium on oil and gas leasing in the Arctic National Wildlife Refuge (which the Trump administration had recently opened for development).The decision over the controversial 0.83 mln bpd cross-border Keystone XL pipeline fulfils a campaign promise and the calls from some environmental activists. Keystone XL was due to go to Cushing (the WTI pricing point), so the cancellation will prevent a larger amount of crude from hitting the hub and is supportive for deferred WTI futures and deferred WTI time spreads. Nevertheless, over 1.2 mln bpd of additional pipeline capacity out of Canada's Alberta province is either planned or possible, regardless of what happens to Keystone XL. The Biden administration aims to toughen environmental regulations for new infrastructure projects, but has so far given no signal it will try and block all oil pipeline projects. More details on Biden's approach should emerge in the coming weeks as appointees for key positions in his administration are confirmed in the Senate. Having recently raised output to record levels, Canadian oil-sand producers are now likely to keep capital spending minimal and focus on paying off debt and improving cash flow. There are no major projects due to come online in the next five years other than the expansion of existing sites, which are likely to add less than 0.4 mln bpd.Yesterday, front-month Brent eventually settled at $56.08/bbl, fixing $0.18/bbl above the previous settlement. Overnight, the API reported a 2.6 mln bbl rise in US crude stocks last week to 487.1 mln bbl amid a 0.342 mln bpd increase in imports and despite a 0.294 increase in refinery runs. Crude oil stocks at Cushing fell 4.3 mln bbl. The refined product data was also bearish, showing a 1.1 mln bbl increase in gasoline stocks and a 0.816 mln bbl build in distillate stocks. The EIA inventory report is due tomorrow at 19:00 Moscow time. This morning, Brent is trading near the $56/bbl mark, with investors eying the ECB decision, eurozone January consumer confidence, December US housing starts, weekly jobless claims and the Philadelphia Fed manufacturing survey. In our view, Brent is likely to remain under pressure today, likely sliding to the $55.2/bbl support level, which would open the door for a drop toward this month's low of $54.5/bbl.GOLD SURGES AS US TREASURY YIELDS SLIDE AND STOCK MARKET INDEXES RISEGold jumped almost $20/oz to $1,857/oz yesterday morning before sliding to $1,835/oz, which prompted further buying activity, taking it up to $1,870/oz. Markets found encouragement from Joe Biden's inauguration, which went off without a hitch, and the fact that the new US president got to work right away. US stimulus expectations predominated the headlines, with the Democrats' control of the Senate suggesting further economic stimulus and a greater chance of Biden's $1.9 trln fiscal package being passed, though Republican support will still be needed. A correction in 10y US Treasury yields also provided a tailwind for gold during the Wall Street session.Today, investors await an ECB rate decision and an EU leaders' summit. Markets are not anticipating any significant changes in monetary policy, but the bank could signal it is ready to expand its stimulus measures this spring given the recent tightening of lockdown measures across Europe. This would provide a boost for risk assets today. Data releases include eurozone consumer confidence and US building permits, housing starts and jobless claims. Japanese CPI and UK consumer confidence are due overnight. After yesterday's rally, gold is now targeting resistance at $1,884/oz, with a break above paving the way to $1,902/oz. A break below $1,867/oz (now a support level) could see gold targeting $1,845/oz.