Commodities Daily - March 18, 2022

> Oil prices rebound on uncertainty over Russian oil shipments in weeks to come. Today, we expect Brent to start consolidating near the $110/bbl mark. The spotlight will be on the weekly Baker Hughes update and the US active rig count in particular, as well as the latest weekly update from the CFTC on managed money positioning in crude oil.> Gold advances slightly as Treasury yields stabilize. Gold rose from $1,930/oz to $1,940/oz yesterday, while the 10y US Treasury yield traded sideways near 2.18%. Gold is trading near $1,935/oz as we write. Markets await US existing home sales and the leading index, both for February. We expect bullion to trade in the $1,920-1,940/oz corridor today.> Aluminum gains on supply risks; iron ore futures still rising on dovish rhetoric from China. Base metals traded mostly higher yesterday, while nickel continued to move against the pack, as it is still catching up to the decline across the rest of the space following the week-long suspension in trading on the LME. Meanwhile, aluminum has been gaining momentum with risks on the supply side predominating. Iron ore futures are still on the rise, as the authorities' dovish rhetoric has overshadowed the new lockdowns in China.OIL PRICES REBOUND ON UNCERTAINTY OVER RUSSIAN OIL SHIPMENTS IN WEEKS TO COMEYesterday, Brent rallied throughout the day, rising from $97.75/bbl to as high as $107.5/bbl, boosted by market worries over a continuing disruption in Russian oil flows after a Kremlin spokesman said that reports pointing to major progress in the negotiations over Ukraine were "wrong" (however, the spokesman did indicate that the discussions will continue). Front-month Brent eventually settled at $106.64/bbl, fixing $8.62/bbl above the previous settlement. This morning, Brent rallied to as high as $109.6/bbl with market players remaining unsure about whether Asian purchases would be able to make up for any possible decline in Urals shipments to Europe over the next two weeks. We note that so far this month shipments from Russia's three western ports (Ust-Luga, Primorsk and Novorossiysk) have largely been going as planned, although most of the barrels exported so far in March were probably purchased before the military operation in Ukraine started.So far, three cargoes have been canceled from the Baltic Sea ports of Ust-Luga and Primorsk. However, the total 0.07 mln bpd canceled is only a tiny fraction of Russia's planned shipments of 1.4 mln bpd from the two facilities in March. Although this is not unusual, as cargoes often get canceled and new ones are often added to the loading program, there is a growing risk that the number of canceled cargoes could increase. It also remains unclear how many Urals cargoes for March remain unsold as trading becomes increasingly private. If Asia is unable to absorb all the extra cargoes, then pressure to cancel more shipments will grow. Today, we expect Brent to start consolidating near the $110/bbl mark. The spotlight will be on the weekly Baker Hughes update and the US active rig count in particular, as well as the latest weekly update from the CFTC on managed money positioning in crude LD ADVANCES SLIGHTLY AS TREASURY YIELDS STABILIZEGold rose from $1,930/oz to $1,940/oz yesterday, while the 10y US Treasury yield traded sideways near 2.18%. Meanwhile, EUR/USD increased from 1.103 to 1.110, creating tailwinds for bullion. Geopolitics, however, was once again the main driver of gold prices. Yesterday, a Russian government spokesperson said that a report of significant progress in negotiations over Ukraine was "wrong," but that discussions would continue. The elevated uncertainty and increased inflation concerns, including those related to the increase in oil prices on the back of these statements, supported gold yesterday. In terms of macro data, yesterday's releases came in better than expected, which created some headwinds for bullion. The Philly Fed business outlook index for March rose to 27.4 (consensus: decline to 14.5), while US industrial production for February was in line with expectations, showing a 0.5% m-o-m increase. Weekly initial jobless claims in the US, housing starts and building permits were all slightly better than expected. Despite such positive data, the geopolitical turmoil has rendered macroeconomic indicators less relevant to investors.During Asian trading today, gold is hovering near $1,935/oz. Markets await US existing home sales and the leading index, both for February. Also, Fed Governor Michelle Bowman and Richmond Fed President Thomas Barkin are expected to deliver speeches today, which may turn out to be important events. After the rate liftoff this week, it will be interesting to get a first indication of what subsequent steps could be in store. This may put some pressure on gold, although the geopolitical news flow will of course remain in focus. We expect bullion to trade in a $1,920-1,940/oz corridor UMINUM GAINS ON SUPPLY RISKS; IRON ORE FUTURES STILL RISING ON DOVISH RHETORIC FROM CHINABase metals traded mostly higher yesterday, with nickel an exception. The 3m LME contract for copper rose 1.88% (+$189/tonne from the previous day's close) to settle at $10,243/tonne, aluminum surged 3.87% (+$126/tonne) to $3,385/tonne and zinc climbed 0.45% (+$17/tonne) to $3,826/tonne, while nickel plunged 8.00% (-$3,645/tonne) to $41,945/tonne.Nickel trading was again quickly halted on the LME early yesterday after the 3m contract hit the down limit. The cap on price movement has since been expanded to 12%. Nickel futures on the LME have plunged 58% so far from the unprecedented peak of around $100,000/tonne seen last week, and LME quotes are quickly moving toward the levels on the Shanghai exchange. We believe it is only a matter of time before the arbitrage window closes. Meanwhile, aluminum seems to be benefiting from the recent resurgence in Covid-19 cases in China, as logistical constraints and aluminum smelters' difficulties obtaining raw materials have offset the negative demand impact from the lockdowns. As a result, aluminum futures are rebounding after touching the 50-day moving average, which remains a strong support level. We think aluminum will likely trade sideways in the days to come, though it could gain momentum if the supply risks continue to predominate.Iron ore futures in Singapore continued to recoup their recent losses yesterday, rising for the third day in a row after touching support at the 200-day moving average of around $145/tonne. The steelmaking ingredient seems to be responding mainly to Chinese authorities' dovish rhetoric and shrugging off the effect of lockdowns. There is evidence that China may be shifting away from its extreme zero-tolerance approach to combatting Covid-19, as President Xi Jinping has emphasized minimizing the economic cost of fighting outbreaks. An ease in Covid policy might soften the impact of the new wave on economic activity in China, thus blunting the effect on iron ore demand. That said, we see further upside for prices in the days to