Commodities Daily - July 26, 2021

> Oil prices are under pressure at the start of the week on resurging demand concerns. There are few important economic releases today, with US new home sales for June being the only highlight. In our view, Brent will keep struggling to rally beyond $74/bbl without a major bullish catalyst. Today, amid growing demand concerns and negative stock market dynamics, it could even slide toward its 50-day moving average near $72.6/bbl.> Gold prices decrease slightly on mixed macro data. Bullion is trading near $1,805/oz as we write. Today, markets await US new home sales data for June and the July reading of the Dallas Fed's manufacturing activity index. Gold is likely to hold in a $1,795-1,815/oz corridor.OIL PRICES ARE UNDER PRESSURE AT THE START OF THE WEEK ON RESURGING DEMAND CONCERNSOn Friday, Brent gained $0.9/bbl and reached as high as $74.2/bbl, squeezing out its first weekly gain in three weeks on signs that global demand is holding up despite concerns that the renewed spread of the virus could stall the recovery. Gains in oil prices came despite the total number of rigs searching for oil across the US rising by seven last week to 387, extending the very gradual boost in drilling for a fourth straight week, according to Baker Hughes data released Friday. Most of the gains came in the Permian Basin, the world's busiest shale patch. Despite this, last week Schlumberger and Baker Hughes suggested the rebound in US shale would likely slow this year as companies keep a lid on spending. Note that despite a strong recovery in crude prices in 2021, the shale industry is largely resisting adding new supply. Front-month Brent eventually settled at $74.1/bbl, $0.31/bbl above the previous settlement. This morning, however, oil is under pressure, with Brent sliding toward $73/bbl on resurging demand concerns as countries including Thailand and Vietnam are imposing curfews in cities to battle a surge in Covid-19 cases. In Germany, senior politicians have floated the possibility of tough restrictions for the unvaccinated and the US's top infectious disease expert, Anthony Fauci, warned that the nation was moving in the "wrong direction" in combating the new wave of the pandemic. In China, there are signs that a fresh outbreak at the airport in the eastern Chinese city of Nanjing has quietly spread to other provinces. There are few important economic releases today, with US new home sales for June being the only highlight. Oil investors will also keep an eye out for Russia's Urals crude oil export program for August. In our view, Brent will keep struggling to rally beyond $74/bbl without a major bullish catalyst. Today, amid growing demand concerns and negative stock market dynamics, it could even slide toward its 50-day moving average near $72.6/bbl. This week, oil investors will eye the Fed meeting, where Jerome Powell's deliberations will be scrutinized for clues on the "when and how" of reining in the stimulus. It's also a big week for earnings reports from oil majors, who are seeking to win back investors with much better profits and a lot more spare cash after crude's rebound this year. European companies report Thursday, with Exxon and Chevron due the following day. Economic data from the US in the coming week will provide key looks at mid-year momentum. The preliminary estimate of 2Q21 GDP (Thursday) is set to post the high-water mark for the year; monthly consumer spending data for June will lay down a base for 3Q21 GDP tracking estimates (Friday); June durable goods orders may show a jump in transportation equipment orders, most notably for aircraft; home sales and price data (June PCE) will also hit the tape. Also, on Friday the EIA will release a monthly report on US oil and gas production (EIA 914 report). We think that this week likely upbeat US weekly inventory data will be offset by coronavirus demand concerns and that Brent will trade sideways around current levels as a LD PRICES DECREASE SLIGHTLY ON MIXED MACRO DATAGold declined from $1,805/oz to $1,800/oz on Friday, while the 10y US Treasury yield ended the day flat at 1.28%. EUR/USD consolidated at 1.177, which constrained gold's movements. Before the US open, bullion was in a mild downtrend and tested the $1,790/oz level despite upbeat July PMI data from Europe. The IHS Markit manufacturing PMI for the eurozone rose to 62.6, just above the expected 62.5, while the services PMI rose to the highest-ever reading of 60.4, above the consensus estimate of 59.3. However, the signs pointing to an accelerating economic recovery in Europe failed to lift gold prices, which were facing pressure from a rise in the US 10y Treasury yield, which was trading above 1.31% at the time. Friday's US macro data was overall mixed for gold but ended up creating strong tailwinds heading into the weekend. The Markit IHS US manufacturing PMI printed at 63.1 in July, above the expected 62, but the services PMI, which is a better indicator of the strength of the post-lockdown economic recovery, fell to 59.8, well below the consensus of 64.5. This suggested that there may be some problems lurking in the US economy and thus helped gold recover to as high as $1,800/oz. Gold is trading near $1,805/oz as we write. Today, the market awaits US new home sales data for June and the July reading of the Dallas Fed's manufacturing activity index. The consensus expects both releases to show an increase, an outcome that would likely see bullion come under pressure, though probably not enough to move it out of its $1,795-1,815/oz corridor. The key events on this week's agenda include the Fed decision and Chairman Jerome Powell's press conference on Wednesday, and then US and eurozone 2Q21 GDP data on Thursday and Friday, respectively. Also due from the US are PCE inflation readings, personal income and expenditures, durable goods orders, wholesale inventories and pending home sales for June; the Conference Board's consumer confidence index and the University of Michigan's consumer sentiment index for July; a housing price index for May; and weekly jobless claims. The July reading of the eurozone consumer confidence index is also scheduled for release this