Commodities Daily - March 21, 2022

> Oil prices keep rising after Houthi rebels attack sites across Saudi Arabia over the weekend. In our view, Brent could rise toward $114/bbl today amid persisting supply risks. Oil investors will also be eying the start of a three-day FT commodities event featuring the CEOs of Vitol and Trafigura. Meanwhile, Biden administration officials are expected to brief energy companies as well as banks on the situation in Ukraine. This comes after the White House publicly called on energy suppliers to step up their production following the jump in prices.> Gold prices drop amid hawkish Fed comments. Gold slid from $1,940/oz to $1,920/oz on Friday, while the 10y US Treasury yield sank from 2.18% to 2.15%. Gold is trading near $1,925/oz as we write. Today's agenda features a speech by Fed Chairman Jerome Powell and the February reading of the Chicago Fed's national activity index. We expect bullion to trade in a range of $1,920-1,940/oz today.> Aluminum gains momentum on Australia export ban; thermal coal close to rebound. Base metals traded mixed on Friday. Nickel is set to come closer to its technical support level at the 50-day moving average in the days to come. Aluminum is gaining momentum after Australia banned alumina exports to Russia. We expect thermal coal futures to rebound after touching support levels. This will most likely happen this week.OIL PRICES KEEP RISING AFTER HOUTHI REBELS ATTACK SITES ACROSS SAUDI ARABIA OVER THE WEEKENDAfter rallying almost $9/bbl on Thursday to $107.5/bbl, Brent started to consolidate within the $105.8-109.6/bbl range on Friday. The IEA highlighted that oil markets are in an "emergency situation" that could get worse, only days after stating in its monthly report that the potential loss of Russian oil exports "cannot be understated." Front-month Brent eventually settled at $107.93/bbl, fixing $1.29/bbl above the previous settlement. Russian crude is still being treated with extreme caution by buyers, as is reflected in the near $30/bbl Urals discount to Brent, though India seems to be eager to take in more Russian crude at these bargain prices. India's oil minister told lawmakers last week that the nation is keeping all options open to see how much Russian crude it can import. Oil from Russia accounted for 2% of India's overall overseas oil purchases in 2021 (about 33 mln bbl), according to Indian government data. The Middle East was the biggest supplier to India, accounting for more than 60% of imports. It remains to be seen just how much Urals (which mostly loads at Baltic Sea ports) will actually flow to Asia. Russian crude from the eastern ports of Kozmino and De-Kastri is surely more likely to find willing buyers in northern Asia.This morning, Brent is rising toward $112/bbl following attacks late Saturday and early Sunday by Yemen's Houthi rebels on at least six sites across Saudi Arabia, including some run by oil giant Saudi Aramco. The Iran-backed group, which used drones as well as ballistic and cruise missiles, targeted an Aramco fuel depot in Jazan in the southwestern part of the kingdom and a liquefied natural gas plant in the Red Sea city of Yanbu, the official Saudi Press Agency reported. The Houthis confirmed on Twitter that they were responsible. The strikes did not impact Aramco's operations, according to the company's CEO, Amin Nasser. In our view, Brent could rise toward $114/bbl today amid persisting supply risks. Oil investors will also be eying the start of a three-day FT commodities event featuring the CEOs of Vitol and Trafigura.Later today, Biden administration officials are expected to brief energy companies including Exxon Mobil as well as banks on the situation in Ukraine. This comes after the White House publicly called on energy suppliers to step up production following the jump in prices. This week, investors will also continue to follow developments in China, where the authorities are battling Omicron outbreaks and mulling further measures to boost economic growth. On Thursday and Friday, EU leaders will discuss emergency measures to limit the effect of high energy costs on electricity prices, including temporary price limits. The European Commission will seek to alleviate the impact of the energy crunch on consumers and companies already reeling from rising power LD PRICES DROP AMID HAWKISH FED COMMENTSGold slid from $1,940/oz to $1,920/oz on Friday, while the 10y US Treasury yield sank from 2.18% to 2.15%. Meanwhile, EUR/USD fell from 1.110 to 1.104, creating headwinds for bullion. On the macro data front, US existing home sales were slightly lower than expected in February, while a 0.3% rise in the US leading index in February was in line with the consensus estimate. However, the main highlight on Friday was hawkish commentary from several Fed officials following the recent FOMC meeting. St Louis Fed President James Bullard said that he had been in favor of a 50 bp rate hike at the recent meeting, that he would still prefer quicker policy tightening and that he would like to see the federal funds rate move above 3% this year. Fed Governor Christopher Waller, meanwhile, expressed support for half-point rate increases at upcoming meetings and for beginning the balance sheet reduction by July to head off "raging" inflation. Richmond Fed President Thomas Barkin also said that he was open to raising rates in increments of 50 bps if appropriate.During the Asian trading session today, gold was quoted near $1,925/oz. Today's agenda features a speech by Fed Chairman Jerome Powell and the February reading of the Chicago Fed's national activity index. Powell will speak again on Wednesday, while Thursday will see February durable goods orders and preliminary March Markit PMIs from the US. Geopolitics remains in focus. We think the Chicago Fed index might show a slight decrease relative to previous readings, while Powell's speech could provide further hints on the direction of US monetary policy and the current risks for the US economy. We expect bullion to trade in a range of $1,920-1,940/oz UMINUM GAINS MOMENTUM ON AUSTRALIA EXPORT BAN; THERMAL COAL CLOSE TO REBOUNDBase metals traded mixed on Friday. The 3m LME contract for copper was up 0.86% (+$88/tonne from the previous day's close) to settle at $10,331/tonne, aluminum dropped 0.10% (-$4/tonne) to $3,381/tonne, nickel plunged 12% (-$5,030/tonne) to $36,915/tonne and zinc was almost flat at $3,826/tonne.After nickel futures on the LME dropped by another down-limit on Friday, the price movement cap was increased to a 15% change in either direction, which takes effect today. Judging by how other base metals plunged from the March 7 highs to their technical support levels in circa 10 days, we believe there is still much downside potential for nickel. The closest support level now stands at $25,000/tonne, which is where the 50-day moving average lies. This represents an additional 32% downside potential, which we think will be covered within the next two to three days.We expect aluminum to outperform the pack today in light of Australia having imposed a ban on alumina shipments to Russia this weekend. Australia accounts for 20% of Russia's imports of alumina, while shipments from Ukraine, which account for another 20%, have also been suspended. This represents a serious supply-side risk on a global scale, since Russia accounts for 6% of global aluminum output. Futures on the LME are up 3.7% this morning.Meanwhile, thermal coal futures seem to have reached their technical support levels at the 50-day moving averages, as Newcastle FOB Australia and API2 slid to $220/tonne and $230/tonne, respectively. The former slowed its fall toward the end of last week, while the latter even rebounded 3.4% from a local low to $238/tonne on Friday. With supply risks still in play, we believe thermal coal futures might gain momentum after they rebound from technical support