Commodities Daily - June 28, 2021

> Oil prices stabilizing after rising on Friday; busy week ahead. This morning, Brent continues to hover above the $76/bbl mark. The market expects OPEC+ to decide to modestly increase its crude output in August at its meeting this week, where it will discuss supply policy. The focus in global markets today will be scheduled remarks from two Fed representatives. Given the lack of catalysts, we think Brent is likely to hold on at around $76/bbl today.> Gold holds steady while US Treasury yields rise. Gold traded around the $1,780/oz mark on Friday while the 10y US Treasury yield climbed to 1.52%. US PCE data indicated that inflation is slowing. Bullion is still near $1,780/oz as we write. Today, the market awaits the Dallas Fed manufacturing index for June. We expect gold to remain range-bound at $1,765-1,795/oz.OIL PRICES STABILIZING AFTER RISING ON FRIDAY; BUSY WEEK AHEADOn Friday, Brent rallied $1.2/bbl to as high as $76.2/bbl. The benchmark was able to register its fifth straight weekly gain amid the ongoing rapid drawdown in global stockpiles as fuel consumption rebounds in key regions including the US and Europe. Meanwhile, the prospects for an imminent surge in Iranian supply are diminishing, as the talks to revive the nuclear deal have been dragging on. On Friday, Iran missed a midnight deadline to renew its temporary atomic monitoring pact with international inspectors, raising the prospect that it could delete sensitive enrichment information, which could complicate the negotiations in Vienna to revive the nuclear accord with world powers. The Iranian government had said that it would decide whether to renew the agreement only after it expired. We note that it let a previous deadline lapse by 24 hours last month before agreeing to extend a pact that preserved video and enrichment data captured at Iranian nuclear installations. Meanwhile, on Sunday US forces conducted air strikes against Iranian-backed militia groups that the US Department of Defense blamed for drone attacks on American facilities in Iraq. The attacks may make it more difficult to revive the nuclear deal that would pave the way for the resumption of Iranian crude exports. We believe that the longer the nuclear talks drag on, the smaller the negative impact on crude prices will be, as demand has continued to recover.This morning, Brent continues to hover above the $76/bbl mark. The market expects OPEC+ to decide to modestly increase its crude output in August at its meeting to discuss supply policy, an event that will dominate this week's agenda for the energy sector. The alliance will decide on its production policy amid increasing signs that the crude oil market is tightening as economies reopen and coronavirus vaccines help pave the way for increased mobility. We note that the 23-nation coalition still has about 5 mln bpd of idled crude capacity (or roughly 5% of global output) after slashing its exports last year. What the group will decide to do at this week's meeting remains a mystery. Russia is expected to propose a further increase in output. The Saudi Arabian energy minister also said recently that he was amenable to some action that would help temper rising inflationary pressures, although the kingdom is worried about the dangers of another Covid outbreak, and many in the cartel oppose boosting production when fellow member Iran is angling for a diplomatic deal to ramp up its exports. As a result, more and more analysts and forecasters have been saying that whatever OPEC+ comes up with this week, it won't be enough to satisfy the market's thirst for oil. Apart from the OPEC+ meeting, this week oil investors will eye a batch of June data from the US including consumer confidence, the ADP employment report, the ISM manufacturing PMI, vehicle sales and, of course, Friday's nonfarm payroll data. The focus in global markets today will be scheduled remarks from two Fed representatives. Given the lack of catalysts, we think Brent is likely to hold at around $76/bbl today. The price action later this week will very much depend on what OPEC+ decides to do. If it decides to boost output only by 0.55 mln bpd in August, as a Bloomberg survey suggests, then Brent could start to rally toward $80/bbl, in our LD HOLDS STEADY WHILE US TREASURY YIELDS RISEGold traded in a $1,775-1,790/oz range on Friday while the 10y US Treasury yield climbed from 1.48% to 1.52%. EUR/USD stayed near 1.193. Bullion edged higher to $1,790/oz before a raft US data was published. US personal incomes for May declined 2% (versus the consensus forecast of a 2.5% drop), while personal outlays remained unchanged (versus the consensus of 0.4% growth). Friday's main release was the US PCE deflator, which the Fed uses as its inflation target. It rose 0.4% for May, below the 0.5% consensus and the 0.6% reading for April. The y-o-y figure of 3.9% was in line with expectations. The same pattern was seen in the PCE core deflator for the same period. The PCE data pushed gold lower amid the rise in Treasury yields. Investors remained concerned that monetary policy tightening could come earlier than expected. Boston Fed President Eric Rosengren, who will be a voting member of the FOMC next year, signaled that a rate hike could come in late 2022. His comment added fuel to the concerns.Gold is trading slightly above $1,780/oz as we write. Today, investors will eye the Dallas Fed manufacturing index for June. Later this week, US nonfarm payrolls and the ADP employment report for June are due on Friday and Wednesday, respectively. This week will also see the US consumer confidence index for June, US pending home sales and construction spending, US factory orders for May, US housing price indexes for April, US initial jobless claims, eurozone CPI and PPI data for June, and plenty of PMI data from Markit and ISM for DMs. We expect bullion to remain range-bound at $1,765-1,795/oz