Commodities Daily - March 10, 2021

> Oil prices slide ahead of EIA weekly inventory update. Yesterday, Brent slid toward $67/bbl, as the EIA in its monthly report made strong upward revisions to its US oil production forecasts for this year and next. This morning, the front-month contract has dipped below $67/bbl, pressured by a strong increase in US crude oil inventories reported by the API overnight and a strengthening of the dollar. Today, investors will be eyeing the EIA weekly inventory update and US February CPI data. As we write, Brent is consolidating within the $65.8-66.9/bbl technical range. In our view, it will remain within this corridor, possibly moving toward its lower end today, with what looks set to be an upbeat US CPI print supporting the dollar and weighing on oil prices.> Gold investors await February US CPI data. Gold was trading around $1,680/oz early yesterday, then climbed to $1,715/oz as the US 10y Treasury yield began to pull back. During today's Asian trading session, gold retreated to $1,710/oz. In focus later today will be the US February CPI data, which is expected to show a 0.3 pp uptick in inflation to 1.7% y-o-y. If inflation comes in above consensus, gold may return to its Monday trading range of $1,680-1,690/oz. If not, it may retest resistance at $1,720/oz.OIL PRICES SLIDE AHEAD OF EIA WEEKLY INVENTORY UPDATEAfter sliding more than $1/bbl late in yesterday's Asian session, front-month Brent began to pare back these losses and surged to an intraday high of $69.3/bbl. This uptrend came on the back of the dollar weakening amid strong upward revisions by the OECD to its global GDP growth forecasts (released back in December) - G20 GDP is expected to grow by 6.2% in 2021 versus 4.7% expected previously, and 4.1% in 2022 versus 3.7% previously. However, when EUR/USD started to slide during the second half of the European session, Brent prices swiftly followed downward, with investor attention turning to the monthly EIA report.The EIA again downgraded its forecast for 2021 global demand, this time by 0.17 mln bpd to 97.50 mln bpd, which would be up versus the actual 92.18 mln bpd in 2020. Asia Pacific and Latin America led the downward revisions, and the US saw the largest upward revision. Also on the bearish side was a 0.15 mln bpd upward revision to 2021 non-OPEC supply led by the US, which was partly offset by downward revisions to Canadian and Norwegian output. The main highlight, however, was that the EIA now expects US crude oil production to decrease only 0.17 mln bpd y-o-y in 2021 (versus its previous forecast of a 0.30 mln bpd drop) to average 11.14 mln bpd and 11.54 mln bpd in December. These revisions come amid this year's surge in oil prices and uptick in the US active oil rig count. According to the EIA, US output should start rising in 2H21 and in 2022, when it is expected to be up 0.88 mln bpd y-o-y to 12.03 mln bpd versus the 0.51 mln bpd y-o-y increase expected previously. By end-2022, crude oil production is expected to rise to 12.50 mln bpd, not far off the record high of 12.86 mln bpd set back in November 2019. We believe that, though a US oil production recovery does not pose significant risks to the bullish fundamental outlook for oil in 2021, next year it is set to become a very significant headwind, as the current OPEC+ deals expires in March 2022. Yesterday, Brent eventually settled at $67.52/bbl, $0.72/bbl below the previous settlement. Overnight, the API reported a 12.8 mln bbl build in US crude stocks last week to 488.8 mln bbl. Crude stocks at Cushing were up 0.3 mln bbl. The refined product data, however, was extremely bullish, showing a massive 8.5 mln bbl drop in gasoline stocks and 4.8 mln bbl draw in distillate stocks. The EIA weekly inventory report is due today at 18:30 Moscow time. The Bloomberg consensus is for a 2.5 mln bbl crude stock build, 2.9 mln bbl drop in gasoline stocks and 3.1 mln bbl drop in distillate stocks. This morning, Brent dipped below $67/bbl following the API report and as the dollar started to strengthen. Today, apart from the EIA weekly inventory update - which we expect to be mixed like last week, with a large crude build (up to 10 mln bbl) and large product stock declines - investors will also be eyeing US February CPI data. As we write, Brent is consolidating within the $65.8-66.9/bbl technical range. In our view, it will remain within this corridor, possibly moving toward the lower end today, with what looks set to be an upbeat US CPI print supporting the dollar and weighing on oil prices.GOLD INVESTORS AWAIT FEBRUARY US CPI DATAGold was trading around $1,680/oz early yesterday, then climbed to $1,715/oz as the US 10y Treasury yield slid to 1.54% (the real yield dropped from -0.62% to -0.66%). In addition, EUR/USD started to trend higher, eventually consolidating around 1.190 after a brief correction to 1.184. Fading doubts about the $1.9 trln stimulus bill and strong US economic data also provided support to bullion yesterday, as did the final set of 2020 eurozone GDP data, which showed a 4.9% decline versus 5.0% previously. The OECD's updated economic outlook also contained upgraded 2021 GDP forecasts for the eurozone (3.9% growth, versus 3.6% in the December outlook) and the US (6.5% versus 3.2%). While the OECD report did not have an immediate impact on the markets, it did highlight the risk that the US could recover considerably faster than the eurozone, which could make investors nervous about a rollback of the Fed's QE program and a further rally in Treasury yields. During today's Asian trading session, gold retreated to $1,710/oz. In focus later today will be the US February CPI data, which is expected to show a 0.3 pp uptick in inflation to 1.7% y-o-y. If inflation comes in above consensus, the resulting rise in Treasury yields could push gold back to its Monday trading range of $1,680-1,690/oz. If not, gold could retest resistance at $1,720/oz. Also in focus will be the US Treasury auction, where 10y paper will be offered up. As a reminder, the weak results from the auction of a 7y issue in late February triggered the first wave of selling in US Treasuries this year, causing the 10y yield to break through resistance at 1.5%. There remains a risk that Treasury yields will continue their recent march upward. We also note that the US House of Representatives voted yesterday to advance President Joe Biden's $1.9 trln Covid-19 relief bill, clearing the way for a vote today, in which the bill is expected to pass.