Commodities Daily - June 29, 2021

> Oil prices slide ahead of OPEC+ meetings and amid coronavirus delta strain outbreaks. This morning, Brent extended its losses, sliding to as low as $74.20/bbl before stabilizing back near $74.50/bbl. Investors are eyeing eurozone and US June consumer confidence data, as well as the OPEC+ technical committee meeting results ahead of the committee meeting tomorrow and the main meeting on Thursday. Ahead of the meetings, downside risks for Brent still remain. A break below the $74.20/bbl support level would bring up the $73.00/bbl support level, but we think that today Brent will manage to hold above the important $74.20/bbl support, avoiding further losses partially thanks to a likely upbeat API inventory report due overnight.> Gold holds around $1,780/oz mark while US Treasury yields ease. Gold stayed near $1,780/oz yesterday while the US 10y Treasury yield declined to 1.48%. It remains near $1,780/oz as we write. Today, the market awaits the US Conference Board consumer confidence index for June and the FHFA house price index and S&P/Case-Shilller home price index for April. We expect gold to remain range-bound at $1,765-1,795/oz.OIL PRICES SLIDE AHEAD OF OPEC+ MEETINGS AND AMID CORONAVIRUS DELTA STRAIN OUTBREAKSYesterday, Brent fell $2.10/bbl to $74.50/bbl as the market braced for OPEC+ producers to potentially increase supply at Thursday's meeting amid the delta coronavirus strain, which has already led to renewed lockdowns across parts of Asia and Australia and is threatening to slow the oil demand recovery. The UK yesterday reported the most new Covid-19 cases since January, and Hong Kong, Spain and Portugal all imposed new restrictions on travel from the UK. As for the technical backdrop, futures at leading pricing locations are in a bullish backwardation structure, but the calendar spreads have started to narrow, which could be an early sign of some weakness. Front-month Brent eventually settled yesterday at $74.68/bbl, $1.50/bbl below the previous settlement. This morning, Brent extended its losses, sliding to as low as $74.20/bbl before stabilizing back near $74.50/bbl. Investors are eyeing eurozone and US June consumer confidence data, as well as the OPEC+ technical committee meeting results ahead of the committee meeting tomorrow and the main meeting on Thursday. A production increase in August is highly likely, but at issue is the size of the hike. Several OPEC nations are thought to favor high prices, but Russia reportedly wishes to prevent the market from overheating and is worried about inflation. Saudi Arabia is the strongest proponent of a cautious approach, seeking to ensure oil and refined products stock draws to sustain the higher prices. Riyadh reportedly is seeking a small hike of 0.5 mln bpd or less, while Russia is reported to be seeking a hike of more than 1.0 mln bpd. We believe that such a Saudi proposal would be more likely at this point, but a 1 mln bpd production hike will become more likely at future meetings should Brent trade near $80/bbl. Saudi Arabia has not named the price level it seeks, but in our view it would be around $75-80/bbl Brent. Ultimately, however, Saudi Arabia's primary concern seems to be guarding downside for prices rather than capping upside, which is where Moscow and Riyadh differ, in our view. In our view, a quota increase of more than 1 mln bpd, which we consider unlikely, would likely be bearish for sentiment and bring prices down temporarily.Ahead of the OPEC+ meetings, downside risks for Brent still remain. A break below the $74.20/bbl support level would bring up the $73.00/bbl support level, but we think that today Brent will manage to hold above the important $74.20/bbl support, avoiding further losses partially thanks to a likely upbeat API inventory report due LD HOLDS AROUND $1,780/OZ MARK WHILE US TREASURY YIELDS EASEGold stayed near $1,780/oz yesterday while EUR/USD held at 1.193 and the US 10y Treasury yield slid to 1.48%. The US Dallas Fed manufacturing index for June came in at 31.1, below the consensus forecast of 32.5 and 10% below the reading for May. The dip in factory activity in the US's second largest state provided modest support for bullion. This was offset by hawkish comments from Richmond Fed President Thomas Barkin, who said a rate hike in 2022 is possible as the Fed has made substantial progress on inflation.Bullion is hovering near $1,780/oz as we write. Gold appears to be trapped by mixed signals coming from the Fed and mixed US data. Investors are likely looking forward to this Friday's US nonfarm payrolls data and to a lesser extent tomorrow's US ADP employment report for the clues to the Fed's monetary policy stance. Today, the market awaits the US Conference Board consumer confidence index for June and the FHFA house price index and S&P/Case-Shilller home price index for April. The eurozone consumer confidence and business climate indexes for June are also due today. We expect bullion to remain range-bound at $1,765-1,795/oz