Commodities Daily - June 8, 2021

> Oil prices sliding in line with broader market selloff. Today, investors are eyeing the monthly EIA report, a eurozone 1Q21 GDP estimate, the US NFIB small business optimism index for May, and a reading of the US trade balance in May. As was the case last week, Brent is holding out above the $70.70/bbl support level today and should, in our view, continue to do so today, with what is expected to be an upbeat EIA monthly report likely supporting Brent back toward $71.50/bbl later in the day.> Gold gains as dollar slides. Gold rose from $1,885/oz to trade slightly below $1,900/oz yesterday as EUR/USD firmed to 1.22 and markets await US inflation data on Thursday. Gold has edged back today to $1,895/oz as we write amid a strengthening dollar. Today, the US sees the NFIB small business optimism index for May and trade balance for May, while a final reading of 1Q21 eurozone GDP is due. We expect bullion to remain range-bound at $1,875-1,900/oz.OIL PRICES SLIDING IN LINE WITH BROADER MARKET SELLOFFAfter rising toward $72.30/bbl at the start of the day yesterday, front-month Brent began to slide and reached as low as $71.10/bbl, unable to extend recent positive momentum. Weighing on prices was downbeat data on Chinese oil imports (note that strong Chinese imports were a key driver behind this and last year's oil rally), which fell in May to the lowest level this year amid seasonal refinery maintenance and lower purchases by private refiners due to issues with government-issued import quotas. Chinese oil imports in May dipped 14.6% from the high base of a year earlier to average 9.65 mln bpd in May (versus 9.82 mln bpd in April and 11.3 mln bpd last May). For the rest of the day yesterday, Brent traded around the $71.50/bbl mark and eventually settled at $71.49/bbl, $0.40/bbl below the previous settlement. This morning, Brent has tumbled to $70.70/bbl amid a broader selloff in markets. Investors, awaiting the US inflation report on Thursday, are weighing the inflation risks, which could bring policymakers to pare stimulus measures, including Fed asset purchases.Today, investors are eyeing the monthly EIA report, a eurozone 1Q21 GDP estimate, the US NFIB small business optimism index for May, and a reading of the US trade balance in May. As was the case last week, Brent is holding out above the $70.70/bbl support level today and should, in our view, continue to do so today, with what is expected to be an upbeat EIA monthly report likely supporting Brent back toward $71.50/bbl later in the day. (The next support level is $69.90/bbl, while any break below it should be capped at $69.20/bbl.)Meanwhile, traders are watching the talks to revive the Iran nuclear deal. The US recently said that there could be several more rounds of negotiations, while the IAEA yesterday said the talks had entered a decisive stage ahead of meetings this week, due to resume on Thursday (just a week before Iran's presidential election on June 18). If the return of Iranian barrels is delayed to 4Q21, or the global oil demand recovery surprises to the upside, Brent could this summer rise above our $73/bbl 3Q21 average forecast and $75/bbl price target, though ultimately OPEC+ will add more supply if either of these prospects materialize, capping the rally. This is why we are forecasting prices to then fall in 4Q21, also due to the seasonal downtrend in demand during the period. Still, Brent could briefly spike to $80/bbl before OPEC+ responds, and Saudi Arabia has maintained that demand must recover before supply is increased. In addition, technical factors could make such a push higher quite rapid; for now, however, we see $70/bbl as becoming the new LD GAINS AS DOLLAR SLIDESGold rose from $1,885/oz to trade slightly below $1,900/oz yesterday as EUR/USD firmed to 1.22. The 10y Treasury yield traded flat in a 1.56-1.57% range. A lack of major macro data yesterday helped gold climb higher during the US session. Bullion is being supported by inflation worries, though markets do not seem to fear a return to the inflation of the 1970-80s. We think a high US CPI reading on Thursday would likely lead to at least discussion of monetary tightening at the Fed meeting next week, which would create significant headwinds for gold. Gold has edged back today to $1,895/oz as we write amid a strengthening dollar. Today, the US sees the NFIB small business optimism index for May and trade balance for May, while a final reading of 1Q21 eurozone GDP is due, along with the Germany ZEW expectations survey for June. We expect bullion to remain range-bound at $1,875-1,900/