Commodities Daily - June 22, 2021

> Oil advances amid weaker dollar and signs of a rapidly tightening market. Brent has retained positive momentum as we write and has risen to $75.2/bbl as oil futures are signaling a rapidly tightening market amid expectations of another drop in US crude oil stockpiles. Today, investors will primarily eye Fed Chair Jerome Powell's testimony to Congress after St Louis Fed President James Bullard said interest rates may need to rise in 2022. API data on US oil and refined product inventories will be in focus overnight. We expect Brent's current momentum to carry it to the $75.5/bbl mark today.> Gold gains ahead of Powell's testimony. Gold firmed to $1,780/oz yesterday while the 10y Treasury yield climbed to 1.49%. The Chicago Fed national activity index came in at 0.29 in May, below the consensus forecast of 0.7. Bullion is still at $1,780/oz as we write. Today, the market awaits Fed Chair Jerome Powell's testimony before the US Congress and US existing home sales for May. We expect bullion to remain range-bound at $1,765-1,795/oz.OIL ADVANCES AMID WEAKER DOLLAR AND SIGNS OF A RAPIDLY TIGHTENING MARKETBrent slid $1.2/bbl yesterday morning to $73/bbl but then recovered momentum, climbing $1.9/bbl to $75/bbl during Wall Street trading as US equities posted a strong rebound and the dollar dipped. Yesterday the prospect of gradual US monetary policy tightening tempered market concerns over the Federal Reserve's rapid hawkish tilt to tackle high inflation. Fed Chair Jerome Powell, in written remarks, reiterated that inflation had picked up but should move back toward the 2% target once supply imbalances resolve. New York Fed President John Williams also said he continues to view the recent spike in inflation as temporary. Dallas Fed President Robert Kaplan said he favors starting the process of reducing the massive QE program "sooner rather than later," while St Louis Fed President James Bullard said interest rates may need to rise in 2022.Brent eventually settled at $74.90/bbl, up $1.39/bbl on the day. Brent has retained positive momentum as we write and has risen to $75.2/bbl as oil futures are signaling a rapidly tightening. WTI calendar spreads have expanded to their widest backwardation in seven years amid expectations of another decrease in US crude oil stockpiles to be reported this week. If confirmed on Wednesday, this would be a fifth consecutive weekly decline. The strong rebound from the pandemic in the US, China and Europe is bringing increasing fuel consumption and higher prices while OPEC+ remains cautious over further supply increases, although a resurging virus in parts of Asia offers a reminder that the recovery will be uneven. Another bit of bearish news amid all the optimism is the Chinese government's crackdown on the nation's private refiners. A second batch of 2021 crude import quotas allocated to the so called "teapots" was about 35% less than last year, which will crimp flows into a sector that accounts for around a quarter of Chinese processing capacity.Meanwhile, the increasingly bullish outlook for oil is heaping pressure on to OPEC+, which meets next week to consider adding back more of the production it curbed during the pandemic. Today, investors will primarily eye Fed Chair Jerome Powell's testimony to Congress, with API data on US oil and refined product inventories taking the focus overnight. We expect Brent's current momentum to carry it to the $75.5/bbl mark LD GAINS AHEAD OF POWELL'S TESTIMONYGold rose from $1,765/oz to $1,780/oz yesterday as EUR/USD firmed to 1.19. The 10y Treasury yield climbed to 1.49%. The Chicago Fed national activity index for May came in at 0.29, below the consensus forecast of 0.7, which provided an impetus for gold yesterday. Moreover, the Fed is still projecting that inflation will prove transitory, according to written remarks by Jerome Powell before today's testimony. Powell also indicated that easing supply shortages should lower inflation. New York Fed Chair John Williams said the Fed should not rush to cut off support to the still-recovering economy. That also supported bullion yesterday.Gold is hovering near $1,780/oz as we write. The market today awaits Powell's testimony, during which potential questions from the House subcommittee could bring further light to the monetary policy outlook. US existing home sales for May are also due today. We expect bullion to remain range-bound at $1,765-1,795/