Commodities Daily - June 11, 2021

> Oil trades sideways ahead of IEA monthly report. Brent is hovering above $72/bbl as we write, with the market today primarily awaiting the IEA monthly oil market report, the preliminary University of Michigan consumer sentiment index for June and the weekly Baker Hughes US rig count. We think Brent is likely to retest resistance at $72.7/bbl today as we expect an upbeat IEA report, while a further gain all the way to the nearest resistance corridor of $73.4-73.80/bbl seems unlikely.> Gold gains after US inflation data. Gold climbed to $1,900/oz yesterday as the 10y US Treasury yield sank to 1.43%. The US CPI readings for May were slightly higher than expected, while the ECB decided to maintain its elevated pace of bond purchases. This morning, bullion continued to hover near $1,900/oz. Investors await the June reading of the University of Michigan US consumer sentiment index and news from the G7 meeting in Cornwall. We expect gold to remain range-bound at $1,890-1,910/oz.OIL TRADES SIDEWAYS AHEAD OF IEA MONTHLY REPORTBrent retreated to $71.5/bbl yesterday morning before beginning to generate positive momentum amid a brightening demand picture, with road traffic in the US and most of Europe pretty much returning to pre-Covid levels. Also supporting prices was the release of an upbeat monthly OPEC oil market report in which the cartel highlighted that "overall, the recovery in global economic growth, and hence oil demand, are expected to gain momentum in the second half." Oil demand estimates for 2021 were revised higher for India and Eurasia as a healthy rebound in economic momentum is expected to stimulate industrial fuel demand. The OPEC secretariat expects Canada, Brazil, China and Norway to be the main drivers for supply growth this year.Brent found itself near $72.4/bbl ahead of the US May CPI reading, which came in at 0.6% m-o-m and 5% y-o-y, slightly above the consensus and following a 0.8% m-o-m jump in April, the largest since 2009. The relatively small beat may not be enough to force the Fed to change its dovish stance, which should support risk assets. Elevated inflation is regarded as temporary, although how long it will remain in place is unclear. In our view, yesterday's data will prove insufficient for the Fed to tighten monetary policy next week, although this move is highly likely next month. Following the US inflation data, Brent rallied to a YTD high of $72.93/bbl amid an uptick in EUR/USD and positive stock market momentum.Later on, news emerged that US Treasury Department had removed sanctions on three former Iranian officials and two companies that previously traded Iranian petrochemicals. Secretary of State Antony Blinken said in a statement accompanying the notice of the action that "these actions demonstrate our commitment to lifting sanctions in the event of a change in status or behavior by sanctioned persons." Officials familiar with the nuclear talks in Vienna said the US government has been looking at how it could inject momentum into the negotiations. Brent swiftly tumbled to an intraday low of $70.95/bbl as a result. The US deputy secretary of state said that the talks will resume this weekend but that Iran's June 18 presidential election was a complicating factor.Brent is hovering above $72/bbl as we write, with the market today primarily awaiting the IEA monthly oil market report, the preliminary University of Michigan consumer sentiment index for June and the weekly Baker Hughes US rig count. We think Brent is likely to retest resistance at $72.7/bbl today as we expect an upbeat IEA report (we think the agency could raise its oil demand estimate for this year), while a further gain all the way to the nearest resistance corridor of $73.4-73.80/bbl seems unlikely. The University of Michigan's consumer sentiment reading for June is likely to be boosted by the improving labor market and rising wages, despite concerns over LD GAINS AFTER US INFLATION DATADuring the first half of the day yesterday, before the US CPI data was published, gold retreated to around $1,875/oz. US inflation ended up coming in slightly higher than expected, with headline readings of 0.6% m-o-m (versus 0.5% consensus) and 5.0% y-o-y (versus 4.7%), which caused bullion to rise to around $1,900/oz, while the 10y US Treasury yield dropped to 1.43%, a three-month low. The rebound in gold prices was perhaps more moderate - gold did not move far beyond $1,895/oz, its average level in June. This may indicate that markets largely agree with the Fed that the current inflationary pressure so far seems transitory in nature, though concerns about tapering QE likely remain. Additional tailwinds for gold came from a further slide in US initial jobless claims, to 376k from 385k last week, although the print was slightly above the consensus forecast of 370k. Meanwhile, EUR/USD was steady near 1.218, thus providing support for gold prices. The ECB reiterated its dovish stance at its meeting yesterday and decided to maintain its elevated pace of bond purchases, which should help the European economy continue to recover. It also raised its growth and inflation projections for the eurozone.Gold is trading near $1,900/oz as we write. Investors await the June reading of the University of Michigan US consumer sentiment index. Analysts expect the gauge to climb to 84.4, up from 82.9 in May. If it ends up climbing even higher than this, gold may experience some pressure. Markets will also be keeping an eye on the proceedings at the G7 meeting in Cornwall. We expect gold to remain range-bound at $1,890-1,910/oz