Commodities Daily - July 8, 2021

> Oil slides further ahead of EIA inventory report. The oil market will primarily eye the weekly EIA inventory report today and is likely to pay increasing attention to rising concerns over the Delta variant in Asia, with Indonesia in the throes of a major outbreak, Thailand seeing a jump in cases, and Japan set to declare a state of emergency over the Tokyo Olympics. We expect Brent to bounce toward resistance at $74.4/bbl (although it is unlikely to surge all the way to the next resistance level at $75.2/bbl) amid a likely upbeat EIA report, as it has probably completed its correction from Tuesday's high of $77.84/bbl.> Gold inches up as Treasury yields slide. Gold inched higher from $1,795/oz to almost $1,805/oz yesterday while the 10y US Treasury yield dropped from 1.35% to 1.30% and the latest FOMC minutes indicated mixed sentiment among Fed officials. During the Asian session today, gold was hovering near $1,800/oz. The main item on the calendar is the ECB strategy review, as well as weekly US initial jobless claims. We think gold is likely to be range-bound at $1,785-1,810/oz.OIL SLIDES FURTHER AHEAD OF EIA INVENTORY REPORTBrent pared back some of its losses incurred on Tuesday and climbed toward $76/bbl during yesterday's European trading hours but then began to generate strong negative momentum (especially after the opening in New York) and dropped to $72.6/bbl. A simultaneous rise in the dollar to a three-month high was a key factor weighing on oil yesterday, similar to the bid for safe-haven US Treasuries on Monday, which drove quotes higher and yields lower, with equities and commodities suffering as a result.Later on yesterday, investors were able to digest the monthly EIA report, which brought a small 0.04 mln bpd cut to the monthly global demand forecast for 2021. Demand in non-OECD countries was revised lower on the back of downward revisions to the demand outlook in the Asia-Pacific region. Demand in the OECD was revised slightly higher, led by Europe. Non-OPEC supplies for 2021 were revised down by 0.12 mln bpd, with Europe and Latin America leading the downward revisions, although this was partly offset by a modest upward revision to US production. The EIA foresees US production growth remaining limited through next year despite rising oil prices and rebounding demand. Oil explorers will produce 0.02 mln bpd more than previously forecast for this year, or 11.1 mln bpd, while crude oil output next year was raised by 0.06 mln bpd to a yearly average of 11.9 mln bpd, making it the first upward revision since March.US shale producers have not boosted production significantly in recent months, favoring discipline and investor returns over supply growth. The government's weekly oil production data has so far been a testament to that, with domestic output flat-lining at just above 11 mln bpd, roughly 2 mln bbl under its peak before the pandemic. After a brief price spike as OPEC+ negotiations fell apart on Monday, Bloomberg reported that US shale executives had begun hitting the phones to plan a comeback for American crude production by securing hedges, locking in prices for the oil they plan to produce next year and protecting themselves against a potential market slump.Brent is trading near $73.5/bbl as we write following an upbeat API report showing yet another very strong US crude oil stockpile draw (of 7.98 mln bbl), a decrease in gasoline stocks (down 2.74 mln bbl) and a slight build in distillates (of 1.09 mln bbl). Today, the oil market will primarily eye the weekly EIA inventory report and is likely to pay increasing attention to rising concerns over the Delta variant in Asia, with Indonesia in the throes of a major outbreak, Thailand seeing a jump in cases, and Japan set to declare a state of emergency over the Tokyo Olympics. We expect Brent to bounce toward resistance at $74.4/bbl (although it is unlikely to surge all the way to the next resistance level at $75.2/bbl) amid a likely upbeat EIA report, as it has probably completed its correction from Tuesday's high of $77.84/ LD INCHES UP AS TREASURY YIELDS SLIDEGold inched higher from $1,795/oz to almost $1,805/oz yesterday while the 10y US Treasury yield dropped from 1.35% to 1.30%, which created tailwinds for bullion. EUR/USD weakened to 1.180, which limited the upside, however. In the FOMC minutes published yesterday, investors found mixed signals: on the one hand, some officials suggested to keep in place the $120 bln per month bond-buying program and wait for the reopening of the economy to take hold (citing a high degree of uncertainty, which requires a "patient" approach), while on the other, inflation risks were said to be "tilted to the upside," driving the hawkish view that QE should be reduced sooner than expected. Overall, in our view, the mixed minutes reflect the fact that inflation now looks less transitory than the Fed had thought previously, while the US labor market recovery seems to be slowing to a moderate pace. Gold slightly corrected following the minutes but consolidated back above $1,800/oz. Also yesterday, JOLTS job openings printed a record 9.209 mln for May, lower than the expected 9.325 mln but above the revised 9.193 mln for April. This created some headwinds for gold prices. Meanwhile, yesterday the European Commission upgraded its eurozone GDP growth forecasts, now seeing 4.8% in real terms in 2021 and 4.5% in 2022, versus 4.3% and 4.4%, respectively, which is gold-positive.During the Asian session today, gold was hovering near $1,800/oz. The main item on the calendar is the ECB strategy review, which is likely to redefine the bank's inflation target and lay out its role in fighting climate change. In addition, weekly US initial jobless claims are due today, the market seeing a decline to 350k. We think gold is likely to be range-bound at $1,785-1,810/