Commodities Daily - June 3, 2021

> Oil prices surge on US inventory data; DM services PMIs in focus. This morning, Brent has rallied toward $72/bbl after the strong API-reported crude oil inventory draw. Today, apart from the EIA weekly inventory update, investors are eyeing eurozone and US May services PMIs, the ADP US monthly employment report and US weekly initial jobless claims (ahead of tomorrow's jobs report). We think the oil price momentum is still positive, and Brent is now targeting the $72.7/bbl mark, which we think can be reached today on what is expected to be an upbeat EIA report and generally upbeat macro data.> Gold advances amid decline in US Treasury yields. Gold firmed to $1,905/oz yesterday while the 10y US Treasury yield retreated to 1.59%. The Eurozone PPI rose to 7.6% y-o-y in April. Bullion is trading slightly above $1,900/oz as we write. Today, investors await the US ADP employment report for May, initial jobless claims and the PMI services index for May. We expect gold to test support at $1,890/oz today.OIL PRICES SURGE ON US INVENTORY DATA; DM SERVICES PMIS IN FOCUSYesterday, Brent gained $1.0/bbl to $71.5/bbl on further signs of a demand recovery in the US to Europe, while the head of IEA said that he sees a robust consumption recovery playing out over the next six months. US gasoline demand is nearing pre-pandemic levels if compared to the same period in 2019. Meanwhile, last week traffic on UK roads exceeded pre-pandemic levels for the first time. The strong demand outlook and expected inventory draws have created a firmer bullish structure for Brent, with backwardation in the prompt calendar spread strengthening compared to a week earlier. Meanwhile, nuclear talks between Iran and world powers have been pushed back until next week. Providing headwinds was the fact that a firm consumption recovery in parts of Asia remains elusive, as gasoline sales in India dipped to the lowest level in a year amid a second wave of Covid there. Front-month Brent eventually settled at $71.35/bbl, $1.10/bbl above the previous settlement.Overnight, the API reported that US crude stocks fell 5.36 mln bbl last week. The refined product data was bearish, showing a 2.51 mln bbl build in gasoline stocks and a 1.6 mln bbl increase in distillate inventories. The EIA weekly inventory report is due today at 18:00 Moscow time. The Bloomberg consensus is for a 2.5 mln bbl crude draw, 1.5 mln bbl gasoline draw and a 1.7 mln bbl drop in distillate stocks. We anticipate a large crude inventory draw, possibly as strong as that reported by the API, amid an increase in refinery inputs. The increased refining activity, however, could result in gasoline and distillate stock builds, which would limit oil price gains today. This morning, Brent has rallied toward $72/bbl after the strong API-reported crude oil inventory draw. Today, apart from the EIA weekly inventory update, investors are eyeing eurozone and US May service PMIs, the ADP US monthly employment report and US weekly initial jobless claims (ahead of tomorrow's jobs report). The ADP report, in our view, is likely to show only a small acceleration in hiring, as the April reading was already relatively strong. Service-sector hiring is expected to drive the May numbers amid the reopening of the economy and surging demand (the expanded unemployment benefits, however, could be depressing hiring). We think the oil price momentum is still positive, and Brent is now targeting the $72.7/bbl mark, which we think can be reached today on what is expected to be an upbeat EIA report and generally upbeat macro LD ADVANCES AMID DECLINE IN US TREASURY YIELDS Gold climbed to $1,905/oz yesterday while the 10y US Treasury yield eased to 1.59%. EUR/USD held largely stable near 1.221. Bullion retreated to as low as $1,895/oz in the morning, in line with EUR/USD. However, the eurozone PPI data for April indicated a significant rise in producer prices of 7.6% in y-o-y terms, above the consensus forecast of 7.5%. The pace of the recovery in Europe is improving, which created tailwinds for gold to break through the $1,900/oz resistance level amid a rebound in the euro. Meanwhile, the Fed's beige book signaled that the US recovery has been gathering steam over the past two months, intensifying inflation pressure along with supply disruptions and worker shortages. That created a headwind for gold. Also yesterday, Philadelphia Fed President Patrick Harker said the Fed's bond purchase program should "carefully move back." Gold closed near $1,905/oz.Gold is trading slightly above $1,900/oz as we write. Investors await US nonfarm payrolls tomorrow, but today will see the publication of several labor market proxies: the US ADP employment report for May (consensus 650k), initial jobless claims (the consensus expects a decline to 387k), the IHS Markit PMI services index and the US ISM services index (which could provide an indication of labor shortages in that sector) for May. We expect bullion to test $1,890/oz today on the back of positive labor statistics, while resistance remains at $1,910/