Commodities Daily - June 2, 2021

> Oil steadies following OPEC+ meeting. Today, investors will mainly be awaiting the release of the Fed's beige book and the API's assessment of US oil and refined product inventories overnight, which has been delayed by a day due to the US public holiday on Monday. Oil retains positive momentum, and we expect Brent to retest resistance at $71.4/bbl today, with an unlikely break above paving the way to $72.7/bbl. Support is at $69.9/bbl, with any break below likely to be capped at $69.2/bbl.> Gold prices drop following upbeat US manufacturing PMIs. Gold was unable to hold on around $1,910/oz and slipped below support near $1,900/oz yesterday, while the 10y US Treasury yield hovered around the 1.62% mark. The main factor driving gold prices lower yesterday was upbeat macro data from the US - both the IHS Markit and ISM manufacturing PMIs for the month of May came in better than expected. This morning, bullion continued to trade slightly below $1,900/oz. The highlights on today's macro calendar are the latest edition of the Fed Beige Book and eurozone PPI data for April. We think gold may test support at $1,890/oz today.OIL STEADIES FOLLOWING OPEC+ MEETINGBrent rallied by almost $2/bbl yesterday morning to reach $71.4/bbl, with the much-anticipated OPEC+ meeting being the major highlight of the day. The group opted to press ahead with an increase of 0.841 mln bpd in July, following hikes in May and June. Supporting prices was the Saudi energy minister's response on the matter of whether more supply increases will be needed. He said "I will believe it when I see it," referring to the anticipated demand boost this summer that would require additional supply to avoid the oil market overheating and moving into a strong deficit. According to the deal signed a year ago, OPEC+ is meant to hold production steady between this July and April 2022. This could clearly be renegotiated, and we think there will be pressure to do so as demand continues to recover. For August, we think OPEC+ will hold fire on further rises until there is more clarity on the impact of the return of Iranian production. OPEC+ will continue to hold monthly meetings and will be willing to add barrels should Iran's return be delayed, but the group will wait and see first. Any delay to Iran's return would be felt acutely in the market, as a series of unplanned upstream outages have emerged just as refineries are returning from maintenance. Colombian, West African and Venezuelan exports have all been disrupted by an array of political and upstream issues. Meanwhile, the prospect of Iranian barrels making a speedy return to the market has indeed started to look slim. Yesterday, an Iranian government spokesman cooled speculation that US sanctions on Tehran's key oil exports might soon be lifted by saying that negotiators (who are in their eighth week of talks) now expect to finalize a deal in August. This also supported prices yesterday.Brent retreated to $70/bbl during yesterday's US trading hours as US stock markets began to pare gains in what may have been a prelude to Friday's jobs report. Yesterday's ISM employment reading came in much softer than economists had expected, adding to fears that a tight labor market could slow the US economic recovery and push wages higher. The S&P 500 erased gains of as much as 0.7% as a result. Meanwhile, factories around the globe are ramping up production to fill soaring orders, adding to the optimism of a strong global recovery. US manufacturing quickened in May as the ISM gauge of new orders neared a 17-year high, echoing the trend seen in other parts of the world. However, delivery times lengthened to their longest since 1974, a sign that supply constraints are holding factories back. Brent eventually settled at $70.25/bbl, up $0.93/bbl on the day.Today, investors will mainly be awaiting the release of the Fed's beige book and the API's assessment of US oil and refined product inventories overnight, which has been delayed by a day due to the US public holiday on Monday. Oil retains positive momentum, and we expect Brent to retest resistance at $71.4/bbl today, with an unlikely break above paving the way to $72.7/bbl. A travel spree in the US appears to be proving the market right to be bullish on oil. From bustling US airports to surging demand for gasoline, all signs from this past Memorial Day weekend reaffirm the oil market's bet that Americans will be out traveling in force this summer, boosting demand in the largest oil-consuming country. Support is at $69.9/bbl, with any break below likely to be capped at $69.2/ LD PRICES DROP FOLLOWING UPBEAT US MANUFACTURING PMISGold was unable to hold on around $1,910/oz and fell below support near $1,900/oz yesterday. The 10y US Treasury yield rose to as high as 1.63% before eventually settling at 1.61%. Meanwhile, EUR/USD traded sideways near 1.222. In the first half of the day, gold climbed above $1,910/oz, supported by a weakening dollar. This occurred early yesterday, in the wake of the release of the IHS Markit eurozone manufacturing PMI, which came in at 63.1 in May, above the consensus of 62.8. However, during the US session, gold ran into headwinds from upbeat May manufacturing PMI readings from both IHS Markit (62.1 versus the consensus estimate of 61.5) and ISM (61.2 versus 61.0), as these signs of improvement in the US economy seemed to bring Fed policy tightening one step closer. However, within the ISM report, it was noted that the manufacturing sector has been constrained by worker shortages, which suggests there is a possibility that Friday's nonfarm payrolls figure for May could be on the weaker side. Gold went on to end the day slightly below $1,900/oz.Bullion continued to trade close to the $1,900/oz mark during today's Asian session. This week, investors' focus has shifted to the US labor market in light of the recent high inflation readings. The big jobs report is due on Friday, but we may get a glimpse of what's to come tomorrow from the ADP employment report, as well as the ISM services PMI reading and report, which could provide insight into the state of the jobs market within the US services sector, the driving force for the economy. Friday's jobs data has the potential to significantly alter the outlook for Fed policy. As for today's macro calendar, the highlights are the latest edition of the Fed Beige Book and eurozone CPI data for April. We expect gold to test support at $1,890/oz