Commodities Daily - January 21, 2022

> Oil slides along with US stocks, amid rare increase in US crude oil stocks. This morning, Brent dived to as low as $85.7/bbl, extending the negative momentum in risk assets from the second half of the US trading session, before rebounding back toward $87/bbl. Today, investors will eye January eurozone consumer confidence and the weekly Baker Hughes data with the US active rig count. Brent, in our view, is likely to end the week near $88/bbl as some buying opportunities have emerged after the recent slide. > Gold holds steady amid mixed macro data. Gold traded sideways around the $1,840/oz mark yesterday, while the US 10y Treasury yield slid from 1.86% to 1.81%. Gold is still trading near $1,840/oz as we write. Today's data releases include the US leading indicators for December, the preliminary eurozone consumer confidence index for January and a speech by ECB President Christine Lagarde. We expect bullion to trade in a $1,825-1,840/oz range today.> Base metals still rallying; thermal coal in retreat on Indonesian export ban relief. Base metals continued advancing yesterday, with the rally led by nickel. Underpinning the move higher have been China's stimulus plans and fundamental tightness. Thermal coal is trending lower on some relief in the export ban in Indonesia.OIL SLIDES ALONG WITH US STOCKS, AMID RARE INCREASE IN US CRUDE OIL STOCKSYesterday, after peaking at $89.5/bbl Brent began to slide toward $87/bbl, mirroring the S&P 500 as investors grappled with the prospects of a Fed rate hike cycle to quell high inflation. Meanwhile, US domestic crude stockpiles rose last week for the first time in eight weeks, albeit by a small 0.52 mln bbl and amid a jump in imports. In the US as a whole, refineries operated at 88.1% of total installed capacity, the lowest levels since November, while refinery runs are still below the five-year average, although they clearly recovered from 2020. We expect crude stocks to fall next week, however, as exports climb. With refinery outages rising and maintenance work, we expect a US crude stock draw of 4.7 mln bbl in January, followed by a build of 11.8 mln bbl in February.Gasoline inventories were up by 5.87 mln bbl last week at 246.6 mln bbl, marking an almost 24.0 mln bbl build in the last three weeks. Gasoline demand, meanwhile, rose w-o-w, but the four-week rolling average fell for a third consecutive week to 8.51 mln bpd, the lowest level since March 19. Note that US passenger vehicle miles travelled were 2% lower than 2019 in the seven days ending January 16, similar to pre-holiday levels in the US during autumn 2021. We see January demand 1.5% lower versus January 2019, even though miles travelled will be closer to 2019, with higher vehicle efficiency accounting for the divergence. We also expect gasoline stocks to build by 2.9 mln bbl next week to 249.5 mln bbl. Diesel stocks drew by 1.4 mln bbl to 128.0 mln bbl as a winter storm hit the East Coast, with the cold snap expected to persist through the end of January. However, we expect diesel stocks to build by 0.9 mln bbl next week to 128.8 mln bbl. Total stocks including oil and refined products (excluding strategic petroleum reserves) fell 1.5 mln bbl last week amid strong draws in propane and "other oils" category. Yesterday, front-month Brent eventually settled at $88.38/bbl, fixing $0.06/bbl below the previous settlement.This morning, Brent dived to as low as $85.7/bbl, extending the negative momentum in risk assets from the second half of the US trading session, before rebounding back toward $87/bbl. Today, investors will eye January eurozone consumer confidence and the weekly Baker Hughes data with the US active rig count. Brent, in our view, is likely to end the week near $88/bbl as some buying opportunities have emerged after the recent slide. We note that the recent uptrend in US active rig count could stall amid a blast of cold air across Southern Texas, one of the country's major oil-producing LD HOLDS STEADY AMID MIXED MACRO DATAGold traded sideways around the $1,840/oz mark yesterday, while the US 10y Treasury yield slid from 1.86% to 1.81%. EUR/USD retreated from 1.135 to 1.131. Following its recent rally, bullion consolidated yesterday on the back of mixed macro data, a bout of risk-off on the US market (with the S&P 500 dropping 1.1%) and dovish comments from US Treasury Secretary Janet Yellen. The Philadelphia Fed business outlook index for January showed a significant improvement after the December reading, while US weekly initial jobless claims indicated a deteriorating labor market, with 286k new claims (above the 225k consensus). Yellen said she still expects inflation to drop close to 2% by the end of 2022. She also assured that the Fed was adjusting monetary policy appropriately. These comments reminded the market that Yellen more or less represents the general Fed view, which is targeting 2.6% inflation by the end of 2022, and they helped gold to consolidate near a two-month high.Gold is still trading near $1,840/oz as we write. Today's data releases include the US leading indicators for December, the preliminary eurozone consumer confidence index for January and a speech by ECB President Christine Lagarde. The consensus estimates for today's statistics envisage a deterioration. For bullion, the impact is hard to gauge, as worsening eurozone data weakens the euro against the dollar, while the opposite happens with weak data from the US. Meanwhile, expectations of a hawkish FOMC meeting next week, where the Fed could announce a first rate hike for March, are likely to create some pressure today. We expect bullion to trade in a $1,825-1,840/oz range SE METALS STILL RALLYING; THERMAL COAL IN RETREAT ON INDONESIAN EXPORT BAN RELIEFBase metals continued to rally yesterday. Three-month LME contracts on copper were up 1.51% (+$148/tonne from the previous day's close) at $9,990/tonne, aluminum surged 1.98% (+$60/tonne) to $3,111/tonne, nickel jumped 2.77% (+$641/tonne) to $23,795/tonne and zinc closed higher 1.90% (+$68/tonne) at $3,650/tonne.The rally extended across the board in base metals, with the London Metals Exchange LMEX index - which tracks all six base metals - hitting an all-time high again as it heads toward a seventh weekly gain. Nickel is enjoying speculation over market tightness, which has driven the pack higher. Expectations over China's intentions to stabilize economic growth via monetary and fiscal stimulus have also been an important driver for the current rally in base metals quotes. We believe that there is a lot of speculation behind the move and that seasonally weak demand and upcoming tightening by the Fed should not be underestimated.Meanwhile, the Newcastle coal price is down 6% from the recent peak of circa $200/tonne. This is attributable to the Indonesian export ban having been eased as restrictions on exports have been lifted for the bulk of local companies. Since these include some of the largest ones in Indonesia, we are likely to see an improvement of seaborne supply in the days to come. Hence, we expect a further retreat in thermal coal quotes, but somewhat of a premium is likely to remain for some time until the ban is lifted in full and the market is back to