Commodities Daily - June 15, 2021

> Oil hovering near $73/bbl amid ongoing recovery in demand. Investors today will be following comments emerging from the FT Commodities Summit. Also on the agenda are US May retail sales, May PPI data and the API weekly US oil and refined product inventories. We think that Brent is most likely to consolidate around $73/bbl as investors continue to weigh the outlook for rising demand against the factor of anti-virus curbs being extended in some economies.> Gold slides ahead of Fed meeting. Gold retreated from $1,900/oz to $1,865/oz between Friday and yesterday's close while the 10y US Treasury yield climbed from 1.43% to 1.49%. The University of Michigan sentiment index for June and eurozone industrial production for April came in better than expected. Bullion is still hovering near $1,865/oz as we write. Today, investors await US PPI data, US industrial production and retail sales for May and the Empire State manufacturing index for June. We expect gold to stay range-bound at $1,840-1,870/oz.OIL HOVERING NEAR $73/BBL AMID ONGOING RECOVERY IN DEMANDYesterday, Brent rallied to $73.6/bbl before easing back to $72.6/bbl as growing pandemic-related restrictions in the UK tempered optimism from a robust summer demand recovery in Western countries. However, it bounced back to close at $73.2/bbl. The latest news from the Iranian nuclear talks suggests that Iranian exports look increasingly unlikely to come back online before 4Q21, meaning the 70 mln bbl of crude and condensate the country has in storage will not be available to help bridge the 2.5-3.0 mln bpd crude deficit we see emerging in 3Q21 - without Iran it will be OPEC+ that should meet the rising demand (the next OPEC+ meeting is July 1). Unless more barrels are introduced, the group could risk an overheating of the market.Demand-wise, Western economies are re-opening, vaccination across Asia is gaining steam and a summer heatwave and droughts are buoying oil demand in the Middle East and Latin America, and with Brent and WTI prices above $70/bbl pressure to add production will certainly rise. Though Saudi Arabia is not in a rush to add production and wants to confirm a recovery in demand first, if crude prices approach $80/bbl, consuming countries, as well as Russia, could try to get the OPEC+ production cuts unwound. In addition, OPEC+ compliance could decline in this scenario.Meanwhile, the physical crude market is finally strengthening as refining picks up to capture the upswing in summer demand. In addition to the delay in the return of Iranian barrels and a strong physical crude market, inflation is increasingly on the market's radar, especially as economies around the world reopen. However, this is yet to be fully priced into the bond market. A key upside risk to our optimistic-case forecast of Brent averaging $75/bbl in 2Q21 comes from the risks that inflation will prove more persistent than the Fed currently believes.This morning, Brent is hovering just below $73/bbl, with investors today to be following comments emerging from the FT Commodities Summit, with speakers including the CEOs of Vitol, Trafigura and Mercuria and the chairman of Gunvor. Also on the agenda are US May retail sales, May PPI data and the API weekly US oil and refined product inventories. We think that Brent is most likely to consolidate around $73/bbl today as investors will continue to weigh the outlook for rising demand against the factor of anti-virus curbs being extended in some LD SLIDES AHEAD OF FED MEETINGGold retreated from $1,900/oz to $1,865/oz between Friday and yesterday's close while the 10y Treasury yield rose from 1.43% to 1.49%. EUR/USD eased to 1.212, in line with bullion. The University of Michigan sentiment index for June released on Friday came in at 86.4, above the 84.2 consensus. This indicated increased confidence in the recovery and created a headwind for gold. Yesterday, the eurozone industrial production data indicated a 0.8% increase versus 0.4% growth expected. This helped to strengthen the single currency and provided support for gold. However, bullion trended lower ahead of the US FOMC meeting, which is expected to bring more clarity on the future of the unprecedented stimulus. We believe the Fed is likely to announce its strategy for reducing QE later in the summer at the Jackson Hole conference or at its September meeting. Gold is still trading near $1,865/oz as we write. This week will see the FOMC announcement and US building permits and housing starts for May (tomorrow) and the US leading indicators, eurozone CPI for May and US initial jobless claims (on Thursday). Today, investors await the US PPI, industrial production and retail sales for May, and the Empire State manufacturing index for June. The consensus for the US PPI stands at 6.2% y-o-y and 0.5% m-o-m, but if they surpass that additional pressure on bullion could ensue. We expect gold to trend lower within the $1,840-1,870/oz range today.