Commodities Daily - July 29, 2021

> Oil prices inch higher on upbeat EIA inventory report. This morning, Brent has risen back to slightly above the $75/bbl mark, supported by a weaker dollar following the Fed's reassurance that it is moving very gradually toward tapering and that it will only begin to roll back stimulus once the US economy has shown substantial further progress. Today, investors will eye July consumer confidence from the eurozone, along with the first print of 2Q21 GDP and weekly jobless claims from the US. We expect the GDP data to be ahead of the consensus, which could help push Brent firmly above $75/bbl.> Gold advances on the back of Powell's remarks. Gold rose from $1,800/oz to $1,810/oz yesterday amid a slide in the 10y US Treasury yield from 1.24% to 1.23%. Powell's comments following the publication of the FOMC statement yesterday were taken as dovish, which has helped gold advance to around $1,815/oz as we write. Today, markets await the first reading of US 2Q21 GDP, US pending home sales for June, weekly US jobless claims and eurozone consumer confidence data for July. We think bullion may attempt a test of resistance at $1,820/oz.OIL PRICES INCH HIGHER ON UPBEAT EIA INVENTORY REPORTYesterday, Brent fluctuated within a $74.4-75.3/bbl range, reaching the upper end of this range in the early European trading hours before sliding toward $74.6/bbl ahead of the EIA inventory report. The US government's inventory data showed crude oil inventories falling by 4.09 mln bbl to 435.6 mln bbl and crude stockpiles at the Cushing storage hub dropping to the lowest level since January 2020. We note that given the persisting backwardation in WTI futures, there is no incentive to keep storing oil. The crude draw was driven by a 0.59 mln bpd drop in imports to 6.5 mln bpd, a 0.2 mln bpd drop in US crude output to 11.2 mln bpd and a slight 0.03 mln bpd increase in exports to 2.49 mln bpd. A 0.13 mln bpd decrease in refinery inputs to 15.87 mln bpd was insufficient to offset the overall draw. Refinery runs declined for the fourth straight week on the back of reduced oil processing in the Midwest due to refinery outages.Also upbeat was the fact that gasoline stocks dropped for the second week, this time by 2.25 mln bbl to 234.16 mln bbl, amid a strong decline in imports and a stock draw in the New York harbor that more than offset a build in Houston. This points to a strong recovery in New York, and the recovery may continue, as New York City is expected to extend a vaccine mandate to all city workers. Meanwhile, nationwide gasoline demand inched up to the highest level since the week ending July 2. It will be interesting to see in September how the return of in-person schooling and work at offices will alter the normal seasonality of gasoline demand. Distillate stocks fell 309 mln bbl to 137.9 mln bbl, with distillate demand seeing a strong uptick. Total crude oil and refined product stockpiles (excluding strategic petroleum reserves) fell 6.45 mln bbl w-o-w. In our view, the crude oil and refined product inventory draws are likely to persist in the coming weeks, providing support to prices.The upbeat report pushed Brent to the $75/bbl mark, but it eventually settled at $74.74/bbl, $0.26/bbl above the previous settlement. This morning, Brent has risen back to slightly above the $75/bbl mark, supported by a weaker dollar following the Fed's reassurance that it is moving very gradually toward tapering and that it will only begin to roll back stimulus once the US economy has shown substantial further progress. Today, investors will eye July consumer confidence from the eurozone, along with the first print of 2Q21 GDP and weekly jobless claims from the US. We expect the GDP data to be ahead of the consensus, which could help push Brent firmly above $75/bbl. We note that US economic activity in 2Q21 was affected by stronger consumer and business confidence amid the reopening of the economy, but not by the risks posed by the Delta variant, which emerged later. While the current downside risks to economic growth are more salient now than in 2Q21, we still expect only a limited negative impact on the economy as a whole. LD ADVANCES ON THE BACK OF POWELL'S REMARKSGold rose from $1,800/oz to $1,810/oz yesterday amid a slight correction in the 10y US Treasury yield from 1.24% to 1.23%, which created tailwinds for gold. Meanwhile, EUR/USD edged up from 1.182 to 1.185, which also supported bullion. There was not much important macro data yesterday with the exception of US wholesale inventories, which grew only 0.8% m-o-m in June versus an expected 1.1% increase. The data pointed to increased consumer activity, thus pressuring gold to $1,795/oz in the early US trading hours. However, markets were far more focused on the Fed decision and Jerome Powell's subsequent press conference. The Fed kept in place its fed funds rate corridor of 0.00-0.25% and its $120 bln in monthly asset purchases. According to the statement, the purchases will not start to be rolled back until "substantial further progress" has been made in the US economy. However, the statement also indicated that the economy is making progress and that the committee will continue to monitor this progress at coming meetings. The markets took these words as hawkish on the whole, causing gold to slip below $1,795/oz. However, Fed Chairman Jerome Powell's subsequent comments calmed investors. He said that the progress required for tapering is not there yet and that the Fed needs to be careful in rolling back its support for the economy. And while Powell admitted that Fed policymakers had started discussing how to taper QE when the time does come, no decisions on the timing have been made yet. The markets took Powell's words as dovish overall, and gold sharply advanced to $1,810/oz.The positive momentum carried over into this morning's trading in Asia, where gold pushed above $1,815/oz. Today, markets await the first reading of US 2Q21 GDP, US pending home sales for June, weekly US jobless claims and eurozone consumer confidence data for July. The consensus is calling for US GDP growth of 8.5% (Q-o-Q annualized) and 385k initial jobless claims. If the actual data comes in at these levels or slightly weaker, we think gold could test resistance at $1,820/oz today, which would open the way to the $1,825-1,835/oz corridor, where it traded for a short period in the middle of