Commodities Daily - June 25, 2021

> Oil steady ahead of US personal income and consumption report. This morning, Brent is oscillating within a $75.5-76.0/bbl range as investors await the May personal income and consumption report from the US. In our view, Brent is likely to continue hovering below $76/bbl today, as we do not see any catalysts strong enough to push the benchmark past technical resistance and extend the rally.> Gold stays range bound as US Treasury yields hold steady. Gold remained in a tight corridor of $1,775-1,790/oz yesterday while the 10y US Treasury yield hovered near 1.49%. Some US Fed officials said they would like rate hikes to start in 2022, while US macro data proved supportive for gold. Bullion is trading near $1,775/oz as we write. Today, the market awaits US PCE inflation, personal income and spending for May and the University of Michigan sentiment index for June. We expect it to remain range-bound at $1,765-1,795/oz.OIL STEADY AHEAD OF US PERSONAL INCOME AND CONSUMPTION REPORTYesterday, Brent was down as much as $1.3/bbl, but it then pared back most of its losses and finished the day near $75.6/bbl as investors digested a raft of upbeat US economic data. First of all, US durable goods orders rose for the 12th time in the last 13 months in May, supported by demand for civilian aircraft. Orders for aircraft surged 27.4% after shooting up 31.5% in April. This shows that American industry is still thriving despite the supply chain issues and worker shortages. This chimes with the Federal Reserve's report earlier this month, which showed that factory production climbed 0.9% in May on a surge in output of cars, trucks and auto parts. The ISM manufacturing index also indicated that US factory output grew in May for the 12th straight month. Meanwhile, new applications for unemployment benefits barely fell in mid-June and have remained above 400,000 for two weeks straight now, a disappointing result that points to ongoing stress in the US labor market even as the economy rapidly improves. In general, US economic data has remained quite upbeat, portending healthy demand for oil going forward. This supports the narrative that we could see a very strong market deficit emerge this summer unless OPEC+ decides at next week's meeting to boost production in August. The alliance, led by Saudi Arabia and Russia, is set to meet July 1 and is widely expected to bring back more output in August based on a recent Bloomberg survey. Delegates from the coalition say discussions are already underway. Saudi Arabia so far hasn't given any clear signal on the position it will take at next week's talks. However, the kingdom has typically been cautious about rolling back cuts, and its energy minister said last week that he wanted to see clear evidence of a strong demand recovery before restoring more halted production. Meanwhile, India, the world's third biggest oil consumer, has once again urged OPEC and its allies to revive halted oil production due to its "deep concern" over spiraling energy prices. The current price pressures are particularly acute for India, where the local currency has depreciated steadily against the dollar in recent years. The cost of oil is fast approaching 5,550 rupees per barrel, which is just 10% less than during the market frenzy of 2007-08.This morning, Brent is oscillating within a range of $75.5-76/bbl as investors await the May personal income and consumption report from the US. The data should provide insight into the extent to which Americans have sought to make up for their lost time during the pandemic. A spike in airfares, rental costs and restaurant prices is likely to push nominal spending on services even higher, as vacation-hungry consumers have become less price-sensitive. In our view, Brent should continue hovering below $76/bbl today, as we do not see any catalysts strong enough to push the benchmark past technical resistance and extend the rally. We would also like to point out that crude prices are likely to witness some turbulence in the very near term due to the uncertainty over the OPEC+ meeting. We also note that prices have been hovering in overbought territory recently, so traders may pounce on any signs of weakness. Still, the cartel is very much in control of the outlook for prices, while stockpiles in the US and China are LD STAYS RANGE BOUND AS US TREASURY YIELDS HOLD STEADYGold traded sideways around the $1,780/oz mark yesterday. The 10y US Treasury yield held steady at 1.49% while EUR/USD stayed near 1.193. US wholesale inventories for May rose by 1.1%, above the consensus forecast of 0.8%, while durable goods orders expanded 2.3%, below the 2.8% consensus. US initial jobless claims came in at 411k, above the consensus forecast of 388k. The US macro data signaled that the recovery remains uneven and created support for bullion, pushing it up to $1,790/oz for a time. The third reading of 1Q21 US GDP was in line with the previous calculations at 6.4% in annual terms, which failed to move gold. However, it failed to consolidate at $1,790/oz due to another round of hawkish comments from Fed officials. Atlanta Fed President Raphael Bostic said the Fed might decide within the next few months to reduce its QE program and that he would endorse lifting rates in 2022 and expects two hikes in 2023. That created a headwind for bullion and it eventually closed at $1,775/oz. US President Joe Biden commented on a deal struck between Democrats and Republicans on a $579 bln infrastructure plan, saying it would create millions of new jobs.Bullion is trading near $1,775/oz as we write. Today, the market awaits US PCE inflation, personal income and spending for May and the University of Michigan sentiment index for June. The consensus for the PCE data stands at 0.5% m-o-m and 3.9% y-o-y. If the data is in line with the consensus, we would expect bullion to stay range-bound at $1,765-1,795/oz