Commodities Daily - July 9, 2021

> Brent comes back to pare losses amid upbeat EIA US inventory report. This morning, Brent is trading in a $74.00-$74.50/bbl range as investors digest Chinese June CPI and PPI data, which showed that factory inflation might have peaked and started to ease amid a stronger dollar and government measures to cool commodity price growth. Today, investors will eye ECB President Christine Lagarde's speech, the Baker Hughes US rig count data and the situation with the Delta coronavirus strain in Asia. In our view, today Brent could break above the $74.40/bbl resistance and push toward the next resistance level at $75.20/bbl, supported by declining US inventories. > Gold remains range-bound as US Treasury yields hold steady. Gold traded sideways within a $1,795-1,820/oz range yesterday while the 10y Treasury yield stuck near 1.30%. US initial jobless claims came in above expectations. Bullion is trading near $1,800/oz as we write. Today, the market awaits the final reading of US wholesale inventories for May. We expect gold to stay range-bound at $1,785-1,810/oz.BRENT COMES BACK TO PARE LOSSES AMID UPBEAT EIA US INVENTORY REPORTAfter sliding $1.30/bbl to as low as $72.10/bbl around the start of the European trading session yesterday, front-month Brent began to pare back these losses, as dollar's positive momentum that had started earlier this week reversed. The trigger for that was the release of the ECB strategy review, which saw the inflation target raised to 2% with room now allowed for an overshoot of the target for a while. This marks a significant change from the previous "below, but close to, 2% over the medium term" target. The euro gained after the review was released, as traders perceived that the ECB's new strategy will tolerate higher inflation than the Fed's flexible inflation targeting.Ahead of the EIA inventory data, Brent was trading near $73.20/bbl. The EIA reported showed a strong 6.87 mln bbl w-o-w draw in crude oil stocks, as well as a strong 6.10 mln bbl gasoline stockpile decrease and a 1.62 mln bbl build in distillates. The highlight of the report was the record gasoline demand, which topped 10 mln bpd and drove a draw in gasoline stocks for the first time in a month. We note that crude inventories have continued to draw since mid-May, though this week's decline fell short of expectations because of a big dip in crude exports. Another important takeaway is that the steady climb in the US rig count since last September could be making itself felt, as US crude production grew 0.20 mln bpd w-o-w to 11.30 mln bpd. Meanwhile, jet fuel stocks are still building even though airport traffic is up versus 2020, the y-o-y growth not enough to draw inventories. Following the EIA release, Brent rallied further and eventually settled at $74.12/bbl, fixing $0.69/bbl above the previous settlement.Yesterday's price recovery also suggests that fears of an OPEC+ supply-cut deal collapse (which, in our view, are unfounded) are abating. The agreement remains in effect even though the group failed to reach a consensus on how to taper the cuts. There is still broad support to raise the supply quotas by 0.4 mln bpd per month and extend the deal to end-2022 - while the UAE has agreed in principle to this proposal, it will formally support it only if the production baseline is raised starting in April 2022. Negotiations continue, but for now the current quotas (insufficient to meet the much higher demand) will remain in place until end-March 2022. This morning, Brent is trading in a $74.00-$74.50/bbl range as investors digest Chinese June CPI and PPI data, which showed that factory inflation might have peaked and started to ease amid a stronger dollar and government measures to cool commodity price growth. Today, investors will eye ECB President Christine Lagarde's speech, the Baker Hughes US rig count data and the situation with the Delta coronavirus strain in Asia. In our view, today Brent could break above the $74.40/bbl resistance and push toward the next resistance level at $75.20/bbl, supported by declining US LD REMAINS RANGE-BOUND AS US TREASURY YIELDS HOLD STEADYGold traded sideways within a $1,795-1,820/oz range yesterday while the 10y US Treasury yield stuck near 1.30%, limiting bullion's movements. EUR/USD firmed from 1.179 to 1.185, creating a tailwind for gold and making it more alluring for investors using currencies other than the dollar. US macro data was positive for gold. Initial jobless claims unexpectedly jumped to 373k, above the 350k consensus. This offered a signal that the labor market recovery could be weakening, and it temporarily created modest support for gold. The ECB presented a new approach to its general inflation targeting, moving it to a medium-term average of 2%, in line with the Fed. This should help the regulator to be more flexible, and markets welcomed the news. Gold is also being driven by the spread of the Delta variant. Japan has banned spectators from the Tokyo Olympics and is planning a state of emergency in the capital. Meanwhile, Africa has had its worst week during the pandemic, with no signs that the situation will improve, according to the WHO.Gold is trading near $1,800/oz as we write. Today, the market awaits the final reading of US wholesale inventories for May. We believe it is worth keeping an eye on the G-20 finance ministers' and central bankers' meeting in Venice and CFTC traders' commitments. We expect gold to stay range-bound at $1,785-1,810/oz