Commodities Daily - January 28, 2021

> Oil under pressure amid risk-off sentiment, despite massive US crude oil stock draw. Today, investors will eye January eurozone consumer confidence, US 4Q20 GDP, weekly initial jobless claims and December new home sales. In our view, today Brent is likely to drift slightly lower on the ongoing global risk-off trading, testing support at $55.2/bbl. However, we do not expect a break below that into the $54.5-54.9/bbl range, as we do not anticipate today's macro data to surprise to the downside. Meanwhile, resistance is at $56.0/bbl (a break above likely leading to gains into the $56.3-56.7/bbl range).> Gold prices fail to rise as Fed stays dovish, dollar firms ahead of US 4Q20 GDP. We see a correction in gold to $1,818/oz support (a break below which could open the way to $1,761/oz) as likely - gold has already broken through a major support at $1,840/oz. However, likely upbeat macro data could result in bullion stabilizing near current levels but still likely capped below resistance at $1,853/oz.OIL UNDER PRESSURE AMID RISK-OFF SENTIMENT, DESPITE MASSIVE US CRUDE OIL STOCK DRAWAfter inching upward early in the day yesterday to an intraday high of $56.5/bbl, front-month Brent began to slide on global risk-off sentiment, falling along with major stock indexes and EUR/USD to an intraday low of $55.20/bbl. Ahead of the EIA weekly US inventories update, Brent pared some losses amid upbeat US December durable goods orders in particular and traded near $55.50/bbl. The EIA data showed a massive 9.91 mln bbl drop in US crude stocks to 476.65 mln bbl last week amid a 1.10 mln bpd surge in exports to 3.35 mln bpd, a strong 0.98 mln bpd decline in imports to 5.06 mln bpd and a 0.1 mln bpd decrease in US oil production to 10.9 mln bpd. A 0.04 mln bpd decline in refinery inputs to 14.72 mln bpd proved insufficient to offset the overall draw. The gasoline and distillate data, meanwhile, was mixed: gasoline stocks were up 2.5 mln bbl at 247.7 mln bbl, while distillate stocks were down 0.82 mln bbl at 162.8 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell by a hefty 11.7 mln bbl, as the large crude stock draw was accompanied by a strong draw in propane stocks and in the "other oils" category. The very strong and rather surprising crude stock draw was much larger than the API's reported 5.3 mln bbl draw, which swiftly pushed Brent back toward the $56.5/bbl mark, boosted as well by a temporary rebound in EUR/USD. We note that crude oil exports gained the most w-o-w since August, which is partially explained by improved conditions with fog on the US Gulf Coast versus the previous week. Meanwhile, gasoline inventories continue to rise and have reached their highest level since late July, while demand is down slightly after a modest gain last week and still below the seasonal norm. Diesel demand ticked up and is at its highest level since March, supported by increased trucking. Later in the day, Brent failed to secure the gains following the upbeat EIA report as negative stock market momentum resumed on Wall Street and attention turned to the Fed decision. Rates were left unchanged and no expansion of the Fed bond-buying program was announced (the $120 bln per month pace is to be kept until there is "substantial further progress" toward employment and inflation goals). Brent eventually settled at $55.81, fixing $0.10/bbl below the previous settlement. Yesterday, in addition, it became known that new US President Biden's new drilling ban on federal lands leaves the vast majority of US crude production untouched, though it may have a long-term negative impact for the Gulf, which is entirely owned by the government.Today, investors will eye January eurozone consumer confidence, US 4Q20 GDP, weekly initial jobless claims and December new home sales. We note that major sectors of the US economy should have adapted to the operating environment by the year-end, with the current pandemic situation having a much more muted impact on broader economic conditions than the first wave. In our view, today Brent is likely to drift slightly lower on the ongoing global risk-off trading, testing support at $55.2/bbl. However, we do not expect a break below that into the $54.5-54.9/bbl range, as we do not anticipate today's macro data surprising to the downside. Meanwhile, resistance is at $56.0/bbl (a break above likely leading to gains into the $56.3-56.7/bbl range).GOLD PRICES FAIL TO RISE AS FED STAYS DOVISH, DOLLAR FIRMS AHEAD OF US 4Q20 GDPYesterday morning, gold was trading sideways within a narrow $1,845-1,850/oz range before starting to slide as global risk sentiment deteriorated and the dollar advanced with no clear triggers. This move may have been exacerbated by verbal interventions from the ECB indicating that it has all of the necessary tools to prevent the euro from strengthening (if such steps are needed). Furthermore, it was reported in the media that the ECB believes that markets are currently underestimating the odds of a deposit rate cut (the rate is currently at negative 0.5%). As a result, the euro declined by nearly 1% against the dollar yesterday, which pressured gold toward the $1,830/oz level. Overall, meanwhile, risk-off sentiment took a firm grip on markets. The US 10y Treasury yielded 3 bps lower (almost reaching 1%), which limited yesterday's losses for gold. The Fed's decision to leave monetary policy unchanged did almost nothing to boost markets, especially given that there was no promise of any more aid for the economy. The Fed's bond-buying program will remain at $120 bln per month until "substantial further progress" toward employment and inflation goals is made. As we write, gold is hovering just above $1,835/oz amid a lack of momentum in EUR/USD, while futures on key stock indexes continue to trade in the red. Today, investors will eye the array of data surrounding the first print of US 4Q20 GDP, January eurozone consumer confidence, and US weekly initial jobless claims and December new home sales. We highlight that a return to risk-off that would further pressure bullion is certainly possible, although in our view a likely upbeat set of macro data today could offset this negative momentum. Regarding today's main highlight, US 4Q20 GDP, we note that growth in the US was more diversified in the final quarter (i.e. away from consumer spending). Although consumers significantly cut back spending amid renewed Covid-19 restrictions in December, the business sector continued to ramp up investment, driven by the need to replenish impaired inventories, while the housing sector benefited from certain structural shifts that the crisis has spawned. Thus, by the end of the year, significant sectors of the economy had managed to adapt to the adverse operating environment. This has meant that a far more severe public health crisis than the first wave in 2Q20 is having a much more muted impact on broader economic conditions. We see a correction in gold to $1,818/oz support (a break below which could open the way to $1,761/oz) as likely - gold has already broken through a major support at $1,840/oz. However, likely upbeat macro data could result in bullion stabilizing near current levels but still likely capped below resistance at $1,853/oz.