Commodities Daily - June 1, 2021

> Oil prices rally ahead of OPEC+ decision; OPEC+ technical committee gives bullish demand outlook. This morning, Brent rallied to as high as $70.3/bbl amid an upbeat Chinese manufacturing PMI from IHS Markit for May. Investors today are focusing on the OPEC+ policy meeting, the IHS Markit eurozone manufacturing PMI for May, eurozone CPI data for May and US May ISM manufacturing PMI. In our view, Brent should rise to trade within a $70.4-71.0/bbl range amid what should be upbeat macro data, brushing off the likely OPEC+ decision to stick to its production increase plan given that demand growth is expected to outstrip supply growth.> Gold holds stable amid dollar weakness. Gold hovered around $1,905/oz yesterday, while EUR/USD firmed to 1.222. The 10y US Treasury yield was stable around 1.59% due to a US public holiday. The OECD upgraded its global GDP growth forecast to 5.8% and US GDP growth to 6.9% for this year. Bullion is trading slightly above $1,910/oz as we write. Today, investors await Markit PMIs for the eurozone and the US, the ISM manufacturing index for May and US construction spending for April. We think gold is likely to test support at $1,900/oz today.OIL PRICES RALLY AHEAD OF OPEC+ DECISION; OPEC+ TECHNICAL COMMITTEE GIVES BULLISH DEMAND OUTLOOKDuring the first half of the day yesterday, the now-expired Brent July contract gained around $1/bbl, reaching as high as $69.8/bbl, as the OPEC+ technical committee - which meets before each ministerial to provide officials with an updated market outlook - forecast that inventories will fall sharply this year if the group sticks to its plan. Global oil stocks are now seen falling below the 2015-19 five-year average (seen by OPEC+ as a standard for a balanced market inventory-wise) by end-July. With demand seen outstripping supply, stockpiles are then expected to decline by at least 2 mln bpd in September-December. This outlook creates the backdrop for what we think is a very likely OPEC+ decision today to stick to its current plan of increasing production through July and possibly even further into 2H21 (so that the oil market does not overheat given the robust demand recovery being driven by the US, China and parts of Europe) depending on how the Iranian nuclear talks evolve. OPEC Secretary-General Mohammed Barkindo yesterday highlighted that Iran's return to the global oil market "will occur in an orderly and transparent fashion," in order not to upset market stability. Meanwhile, Iranian Oil Minister Bijan Namdar Zanganeh told reporters in Tehran yesterday that the country has the potential to rapidly increase crude production. It has been reported, we note, that Iranian oil exports have increased this year, with China the reported main buyer, while Indian refiners have said they will import Iranian barrels once sanctions are lifted. In addition, Iran is to hold a presidential election on June 18 and seems keen to conclude the nuclear talks before then.This morning, Brent rallied to as high as $70.3/bbl amid an upbeat Chinese manufacturing PMI from IHS Markit for May. Investors today are focusing on the OPEC+ policy meeting, the IHS Markit eurozone manufacturing PMI for May, eurozone CPI data for May and US May ISM manufacturing PMI. With regard to the latter, we would highlight that supply chain issues (a key factor in 1H21, which led to a rally in global commodities) should have eased a bit in May, and factories will be playing catch-up for a number of quarters, as April saw the highest reading on record for order backlogs and the lowest for customer inventories. Overall, as the supply response materializes, we expect inflationary pressure from commodities should become less intense and reverse, which would support the view that the recent pickup in inflation is "transitory." In our view, Brent should rise to trade within a $70.4-71.0/bbl range amid what should be upbeat macro data, brushing off the likely OPEC+ decision to stick to its production increase plan given that demand growth is expected to outstrip supply LD HOLDS STABLE AMID DOLLAR WEAKNESSGold hovered around $1,905/oz yesterday, while EUR/USD firmed to 1.222. The 10y US Treasury yield traded stable near 1.59% due to the US public holiday. German inflation climbed to 2.5% y-o-y in May versus the consensus of 2.3%, indicating a nascent recovery in the eurozone and providing a temporary boost for gold yesterday. The OECD upgraded its GDP growth projection for the eurozone to 4.3% in 2021 from 3.6% and also lifted its forecasts for the global economy and the US to 5.8% and 6.9%. An improving US economy is negative for gold as it brings Fed monetary policy tightening one step closer, though gold was unaffected yesterday due to the US holiday and weak trading. Gold is trading near $1,910/oz as we write. Investors await the final reading of the Markit manufacturing PMIs for the eurozone and the US, the ISM manufacturing index for May and US construction spending for April. The consensus for the Markit PMIs are in line with previous readings, while the ISM manufacturing index is expected to improve to 60.9 points and construction spending is expected to rise 0.5% m-o-m. We expect gold to test support at $1,900/oz today amid likely positive US macro