Commodities Daily - July 15, 2021

> Oil slides on downbeat EIA inventory report amid growing chances of OPEC+ agreement to increase supply. This morning, Brent is trying to stabilize above $74.00/bbl amid headwinds from slightly worse than expected Chinese 2Q21 GDP. Investors today are eyeing the OPEC monthly report, weekly US initial jobless claims, US industrial production for June and Fed Chairman Jerome Powell's second day of testimony on Capitol Hill. In our view, today Brent will keep trying to stabilize above $74/bbl following yesterday's selloff, getting some support later in the day from what is expected to be an upbeat OPEC report.> Powell's comments fuel rally in gold prices. Gold rose sharply from $1,805/oz to $1,830/oz yesterday, while the 10y US Treasury yield slid from 1.42% to 1.35% during the US session. The June US PPI reading came in above expectations yesterday, but Fed Chairman Jerome Powell once again reiterated the Fed's dovish stance in testimony before the US Congress. Bullion is quoted near $1,830/oz as we write. Today, markets await the second day of Powell's congressional testimony and US data releases including the July Empire State manufacturing survey, June industrial production and weekly jobless claims. We think bullion may test resistance at $1,840/oz today.OIL SLIDES ON DOWNBEAT EIA INVENTORY REPORT AMID GROWING CHANCES OF OPEC+ AGREEMENT TO INCREASE SUPPLYThe highlight for the oil market during first half of the day yesterday was reports that there had been significant progress made toward resolving the disagreements between the UAE and OPEC+, with a compromise likely giving the country a more generous output limit next year while allowing the whole group to start gradually lifting production in the coming months. The UAE energy ministry issued a statement acknowledging the talks, but said no agreement had been reached yet with the entire group. An "unnamed delegate familiar with the discussions" said that the group would soon set a date for a new meeting.It seems to us that there is a consensus within the group to start producing an extra 0.5 mln bpd each month starting in September and through the end of the year, adding 2.0 mln bpd in total. On the flip side, this means that investors will get back supply-side certainty for another year and a half, as the deal will also likely be extended through the whole of next year, while the risks of the deal breaking down entirely have now diminished. Moreover, since 2Q20 OPEC+ has been implementing a very cautious supply strategy, making sure demand exceeds supply before adding extra barrels amid the high demand/coronavirus risks. In addition to the OPEC+ news, we recall the recent bullish reports that the Iranian nuclear deal talks would be delayed to mid-August.Oil prices fluctuated yesterday following the OPEC+ news before plummeting almost $3.00/bbl from yesterday's peak toward $73.80/bbl on a downbeat EIA weekly inventory report, the release of which was delayed for about an hour. Crude oil stocks fell yet again (down 7.9 mln bbl w-o-w), but gasoline demand plummeted (after the record week in early July) with gasoline and distillate stocks building and US crude oil production increasing (up 0.1 mln bpd and now up in four out of the last six weeks). The latter comes amid gains in supply from Gulf of Mexico fields that have completed maintenance. Front-month Brent eventually settled yesterday at $74.76/bbl, $1.73/bbl below the previous settlement.This morning, Brent is trying to stabilize above $74.00/bbl amid headwinds from slightly worse than expected Chinese 2Q21 GDP. Investors today are eyeing the OPEC monthly report, weekly US initial jobless claims, US industrial production for June and Fed Chairman Jerome Powell's second day of testimony on Capitol Hill. In our view, today Brent will keep trying to stabilize above $74/bbl following yesterday's selloff, getting some support later in the day from what is expected to be an upbeat OPEC WELL'S COMMENTS FUEL RALLY IN GOLD PRICESGold rose sharply from $1,805/oz to $1,830/oz yesterday, while the 10y US Treasury yield slid from 1.42% to 1.35% during the US trading hours. EUR/USD climbed from 1.178 to 1.184, which created additional tailwinds for gold. The US PPI came in at 0.8% m-o-m and 7.3% y-o-y in June, above the consensus estimates of 0.5% and 6.7%, which provided headwinds for bullion, but gold prices started to rise on the back of Fed Chairman Jerome Powell's dovish remarks in testimony before the US Congress. Powell indicated that it is still too soon to scale back supportive measures for the economy, as "substantial further progress" has not been made. He also said that inflation is rising faster than expected, but he noted that the Fed still views the surge in price growth as transitory in nature and that the Fed has the tools to bring inflation back down if it runs significantly higher than the 2% target for "six months or so." His remarks pushed gold beyond the 200-day moving average to $1,830/oz.Gold is trading near $1,830/oz as we write. Today, markets await the second day of Powell's congressional testimony and US data releases including the July Empire State manufacturing survey, June industrial production and weekly jobless claims. We expect Powell to reiterate his view that the spike in inflation is transitory and that it is not yet time to scale back the economic stimulus measures. We think bullion may test resistance at $1,840/oz