Commodities Daily - June 21, 2021

> Oil prices rise on signs of a global demand recovery and amid dragging Iran nuclear talks. This morning, Brent extended its gains to $74.2/bbl, as significant gaps still remain to mend the Iranian nuclear accord, with negotiators for the third time since the talks began in April having missed a self-imposed deadline. There are no major data releases scheduled today. Brent, in our view, is likely to retest the $74.5/bbl resistance level amid globally strong demand during the summer driving season and the pause in the Iran nuclear deal talks, with a rally toward the $75.0-75.5/bbl range so far seeming unlikely.> Gold retreats despite decline in US Treasury yields. Gold had a mixed day on Friday but closed down at $1,765/oz despite the 10y Treasury yield easing to 1.43%. St Louis Fed President James Bullard said the Fed could raise rates next year. Gold has firmed to $1,770/oz as we write. Investors will today eye the start of a conference involving several Fed speakers, the Chicago Fed National Activity Index for May and a speech by ECB President Christine Lagarde. We expect bullion to test $1,780/oz today, though a decisive move above this level seems unlikely.OIL PRICES RISE ON SIGNS OF A GLOBAL DEMAND RECOVERY AND AMID DRAGGING IRAN NUCLEAR TALKSOn Friday, Brent rallied from $72.3/bbl to as high as $73.6/bbl, supported by the strong US oil demand growth now being seen in Europe and EMs, with India also starting to show gains. Meanwhile, headwinds were countered by the fact that OPEC+ remains cautious about bringing back additional supply to the market and seems willing to act only after much-expected demand growth has materialized. For OPEC+, the risk is an overheating of the market, and we think a break through the $75/bbl mark could happen already this week. In addition, non-OPEC supply - despite the high prices - has not been performing particularly strongly either, with the US pumping about 1.8 mln bpd less since the pandemic started (because the pandemic triggered a drop in prices). This reduction is bigger than some major OPEC countries have reduced output combined. Friday's rally also followed the negative momentum earlier in the week following the Fed decision, according to which two interest rate hikes are forecast by 2023 and which boosted the dollar and triggered a vast selloff across commodities.This morning, Brent extended its gains to $74.2/bbl, as significant gaps still remain to mend the Iranian nuclear accord, with negotiators, for the third time since the talks began in April, having missed a self-imposed deadline. Negotiations took a pause on Sunday after Ebrahim Raisi, the judiciary chief since 2019 and seen as a hardliner, won the country's presidential election. According to Reuters (citing two diplomats familiar with the negotiations), a break in negotiations of around 10 days is now expected, as Iran insists that US sanctions placed on Raisi be removed before an agreement is reached; however, the election result is unlikely to derail the effort to revive the nuclear deal given the scale of potential economic benefits for Iran if the sanctions are lifted.There are no major data releases scheduled today. Brent, in our view, is likely to retest the $74.5/bbl resistance level amid globally strong demand during the summer driving season and the pause in the Iran nuclear deal talks, with a rally toward the $75.0-75.5/bbl range so far seeming unlikely. However, later this week the upper end of this range should be a very realistic target, as oil investors will be focused on US oil and refined product inventory updates and Fed Chairman Jerome Powell's remarks in the wake of the Fed decision. Powell's appearance on Capitol Hill on Tuesday should offer more insight into the sooner than expected forecasts for a tightening of monetary policy. Meanwhile, from the supply angle, the oil market will be tracking developments in the Iran story. In addition, we note that the victory of a hardliner in the Iranian presidential election may color conversations between other OPEC+ nations ahead of their July 1 meeting. While Saudi Arabia has signaled it prefers a cautious approach to bringing back supply, the absence of a deal that would unlock Iranian exports would lead to consumer pressure on Saudi Arabia to open the taps. LD RETREATS DESPITE DECLINE IN US TREASURY YIELDSGold had a mixed day on Friday but eventually closed lower at $1,765/oz despite the 10y US Treasury yield easing to 1.43%. EUR/USD corrected to 1.185. Bullion edged to as high as $1,795/oz in the morning along with a firming EUR/USD amid a lack of macro data. Further support came from Minneapolis Fed President Neel Kashkari, who said he would like to keep rates near zero at least through the end of 2023 to help the labor market recover. Moreover, increasing signs of physical demand for bullion are emerging in China, where local market discounts against the global benchmark have narrowed to an average of $5/oz from $12-16/oz previously. However, St Louis Fed President James Bullard stated that judging by inflation forecasts, it may be appropriate to raise rates before the end of 2022 (earlier than many of his colleagues are suggesting). These hawkish comments caused some concern in the market and gold eventually closed at $1,765/oz.Gold is trading slightly above $1,770/oz as we write. Today, investors will eye the start of a conference involving several Fed speakers, the Chicago Fed National Activity Index for May and a speech by ECB President Christine Lagarde. Later in the week, Fed Chair Jerome Powell will testify before the US Congress, while the main data will include US existing and new home sales for May, preliminary Markit DM PMIs for June, US wholesale inventories and durable goods orders statistics, US PCE inflation for May and US weekly initial jobless claims. We expect bullion to test $1,780/oz today, though a decisive move above this level seems