Commodities Daily - March 14, 2022

> Oil consolidates near last week's lows ahead of busy week. Today, investors will keep an eye out for the results from the latest round of the Russia-Ukraine negotiations and the ongoing talks between the US and China in Rome over the situation in Ukraine. We think Brent is likely to continue consolidating near the $110/bbl mark.> Gold slid on lower geopolitical risks. Gold decreased from $1,995/oz to $1,985/oz on Friday, while the 10y US Treasury yield traded sideways near 1.99%. Bullion is trading near $1,975/oz as we write amid some hopes of progress toward a de-escalation in Ukraine. There are no significant macro releases today. We expect bullion to trade in a $1,965-1,985/oz corridor today.> Base metals mixed on Friday; iron ore falls; geopolitics and macro data in focus. Base metals traded mixed on Friday, with trading in nickel still suspended on the LME. A resurgence of Covid-19 cases in China and new lockdowns pose risks for metals demand and will weigh on prices this week. Investors will remain focused on geopolitics, but they will also be keeping an eye on the macro data flow from the US and China.OIL CONSOLIDATES NEAR LAST WEEK'S LOWS AHEAD OF BUSY WEEKOn Friday, Brent traded sideways within the $107.1-113.9/bbl range. Iran and world powers suspended talks to restore the old nuclear deal after Russia sought a guarantee from the US that the sanctions imposed over the situation in Ukraine will not affect its planned partnership with Iran. This will prolong the absence of Iranian barrels in a market desperate for additional supplies. Front-month Brent eventually settled at $112.67/bbl, fixing $3.34/bbl above the previous settlement. This morning, Brent continues to trade around the $110/bbl mark. Iran has announced that it carried out a missile strike in northern Iraq targeting what it called an Israeli "strategic center" and also that it has suspended the talks to restore diplomatic ties with Saudi Arabia. This all comes after the negotiations stalled on Friday, so it is really starting to look like the nuclear accord is in serious jeopardy. This week, we are likely to get some clarity on whether the deal can be saved. We think that the record-high gas prices in the US may be a strong enough factor to keep the talks afloat.US Department of State spokesman Ned Price said on Friday that "we continue to believe that we are close to a potential deal." He added that "there will need to be decisions made in places like Tehran and Moscow, and if that political will is there, if that seriousness of purpose is there, we remain confident that we can achieve a mutual return to compliance in fairly short order." Another factor that is calming oil markets after the spike in volatility last week (apart from the hopes that the Iranian nuclear deal will be revived) is the Ukrainian president's comment that the talks with Moscow have become more substantive, which has allowed for some cautious optimism about steps being taken toward de-escalation. Today, investors will keep an eye out for the results from the latest round of the Russia-Ukraine negotiations and the ongoing talks between the US and China in Rome over the situation in Ukraine. We think Brent is likely to continue consolidating near the $110/bbl mark.This week should bring some clarity to the chaotic picture in the oil market, with reports due from the three major agencies. The IEA, which is contemplating the release of emergency oil stockpiles due to the growing frustration over the inaction of OPEC+, will release its updated projections for global supply and demand on Wednesday. OPEC, meanwhile, is set to publish its market outlook tomorrow. However, the most important item on this week's agenda is the FOMC meeting, which wraps up Wednesday. The Fed is widely expected to announce lift-off for US interest rates, so Jerome Powell's post-meeting remarks will probably get more scrutiny than the decision itself. The Fed chairman is likely to comment on the threats to the US economy posed by soaring prices for energy, metals and LD SLID ON LOWER GEOPOLITICAL RISKSGold decreased from $1,995/oz to $1,985/oz on Friday, while the 10y US Treasury yield traded sideways near 1.99%, although it reached as high as 2.04% during the trading day. Meanwhile, EUR/USD slid from 1.099 to 1.091, creating headwinds for bullion. Hopes for a de-escalation in Ukraine are reducing the risk premium in gold. Yesterday, Ukrainian President Volodymyr Zelensky expressed cautious optimism that the negotiations have become more substantive. Meanwhile, downbeat macroeconomic data tempered the drop in gold prices. The University of Michigan published preliminary consumer sentiment index for March that showed 59.7 points (consensus was 61), the lowest level in almost 11 years. This supports the view that the US economic recovery remains uneven.During Asian trading today, gold slid to $1,975/oz. This comes as a new round of talks between Russia and Ukraine are planned for today. There are no significant macro releases today. This week, special attention will be on the FOMC meeting and Fed Chairman Jerome Powell's press conference on Wednesday. The FOMC appears set to hike rates, which will likely create fundamental pressure on bullion. Moreover, the meeting will provide a new batch of economic projections, including the so-called "dot plot," as well as the Fed's inflation and GDP forecasts. Important US data for February due this week includes US PPI tomorrow, retail sales on Wednesday and industrial production on Thursday. Today, markets will be eyeing developments in Ukraine. Any reduction in tension would pressure gold prices, whereas a breakdown in talks would be supportive. In the absence of macro statistics and ahead of the FOMC meeting, we expect bullion to trade in $1,965-1,985/oz corridor SE METALS MIXED ON FRIDAY; IRON ORE FALLS; GEOPOLITICS AND MACRO DATA IN FOCUSBase metals closed mixed on Friday. The 3m LME contract for copper climbed 0.66% (+$67/tonne from the previous day's close) to settle at $10,184/tonne, aluminum added 1.62% (+$55/tonne) to finish at $3,483/tonne, nickel closed flat at $48,033/tonne and zinc slipped 1.24% (-$48/tonne) to $3,815/tonne.There was again no trading in nickel on the LME on Friday. Investors are still waiting for the exchange to announce the resumption of trading in the market that was recently roiled by a short squeeze that pushed nickel quotes to unprecedented levels just above $100,000/tonne. According to Bloomberg, there is a significant concentration of short positions among Chinese firms in other metals too. We think we could see similar bouts of volatility in the aluminum, copper and zinc markets in the near future. While investors remain focused on the geopolitical situation and its repercussions for base metal prices, quotes will likely face pressure from the lockdown imposed in the trading and technology hub Shenzhen after a resurgence in Covid-19 cases in the region. Meanwhile, there is macroeconomic data due this week from the US and China that could have an impact on base metal prices. The Fed meeting will also be in focus. Iron ore futures in Singapore are down more than 6% today as we write. They have slid below $150/tonne after soaring toward last July's high of around $170/tonne. This is because investors are growing increasingly skeptical about the economic rebound in China amid the resurgence of Covid-19 cases. The latest lockdown measures and those potentially to come will weigh on demand for raw materials, including iron ore. With iron ore inventories still elevated in Chinese ports and supply from Australia expected to return to normal after the cyclone passes, we might see a further increase in stockpiles, which would drive prices lower. This week, investors will remain focused on geopolitics, but they will also be keeping an eye on the macro data flow from the US and