Commodities Daily - March 29, 2021

> Oil falls on renewed demand fears after surging on now-diminishing worries over prolonged global supply disruptions. There are no noteworthy events or data releases today, so the focus will likely be primarily on the buildup to this week's OPEC+ meeting, where May production quotas will be set. In our view, Brent looks set to test support at $62.4/bbl (its 50-day moving average) today on demand destruction fears, though we do not expect a deeper correction, as investors will likely start to expect that OPEC+ will not boost supply in May, a decision that could again push Brent toward $65/bbl.> Gold holding steady as US 10y yield near 1.64%. This morning, bullion is trading near $1,730/oz. Today, investors will eye a speech by FOMC member Christopher Waller. We expect gold to stay within a narrow $1,720-1,740/oz range today.> Most base metals trading lower in light of resumption of shipping traffic through Suez Canal, tin prices higher due to further tensions in Myanmar. Sentiment was upbeat on the LME on Friday: 3m copper futures climbed 2.08% to $8,963/tonne, aluminum 2.32% to $2,298/tonne, zinc 1.29% to $2,830/tonne and nickel 1.47% to $16,390/tonne. The main driver of the gains on Friday was strong macro data from China.OIL FALLS ON RENEWED DEMAND FEARS AFTER SURGING ON NOW-EASING WORRIES OVER PROLONGED GLOBAL SUPPLY DISRUPTIONSAfter starting Friday near $62/bbl, front-month Brent began to climb higher, first consolidating around $63/bbl in the first half of the European session, and then surging to a peak of $64.9/bbl late in the US session. It eventually settled at $64.57/bbl, fixing $2.62/bbl above the previous settlement. Driving prices higher were worries that global supplies of crude and refined products could be disrupted for weeks as workers tried to dislodge the giant container ship blocking the Suez Canal. This move higher pared the sharp losses sustained earlier in the week on concerns that the resumed lockdowns in Europe would hurt demand.This morning, Brent is falling toward $63/bbl, as the ship blocking the canal was partially refloated, raising hopes the busy waterway will soon be reopened. Traders also weighed the demand impact of renewed lockdowns in Australia's Brisbane and the Philippine capital of Manila, as well as news out of the state of Maharashtra in India (home to Mumbai), where authorities have asked residents to prepare for another shutdown if the rebound in new cases is not quelled. There are no noteworthy events or data releases today, so the focus will likely be on the buildup to this week's OPEC+ meeting, where May production quotas will be set. In our view, Brent looks set to test support at $62.4/bbl (its 50-day moving average) today, though we would not expect a deeper correction, as investors will likely start expecting OPEC+ to decide not to raise supply in May, a decision that could again push Brent toward $65/bbl. The JMMC meeting will take place on May 31, while the OPEC+ meeting will be on April 1. We note that the oil futures market will be closed on April 2 for Good Friday.Oil prices have recently been pressured by a worsening short-term demand outlook and supported by the events in the Suez Canal. To cut through the noise, traders will look ahead to the OPEC+ meeting, where the group will decide on whether to bring back some of the 8 mln bpd of output currently on hold. All signs suggest the alliance dominated by Saudi Arabia and Russia will play it safe. Moreover, the last time around the Saudi energy minister said he will only believe in a demand recovery when he sees it. Given that Brent has dropped more than 5% this month and lockdowns are being reintroduced in many countries, it is likely that the kingdom does not want to loosen the taps. Another reason for caution is the rise in Iranian oil exports, which has also weighed on prices. Iran has managed to boost shipments in recent months despite US LD HOLDING STEADY AS US 10Y YIELD NEAR 1.64%Gold traded sideways on Friday within a $1,725-1,735/oz range, while the 10y US Treasury yield was stuck at around 1.64%. EUR/USD edged higher to 1.180. US consumer income and spending fell by the most in 10 months in February as a cold snap gripped many parts of the country and the boost from a second round of stimulus checks faded. Also the US core PCE reading for February came in slightly lower than expected at 1.4% y-o-y versus the 1.5% consensus. All of this points to a patchy recovery in the US, which caused investors to take a closer look at gold, as expectations of monetary policy tightening may be premature. During the Asian session today gold is trading near $1,730/oz, while EUR/USD has declined to 1.177. The dollar began the week on firm ground as the vaccine rollout in the US is proceeding much more quickly than in Europe. This has drawn investors into the greenback. Market participants are now waiting for US President Joe Biden's infrastructure spending package on Wednesday, which is speculated to be in the $3-4 trln range. This may form a new downtrend in gold prices. Also investors will eye nonfarm payroll data for February on Friday. Prior to that, APD employment, US and eurozone consumer confidence indexes, Markit PMIs for DMs for March and preliminary eurozone CPI data for March will all be released. FOMC member Christopher Waller is due to speak today. We expect gold to stay range-bound at $1,720-1,740/oz ST BASE METALS TRADING LOWER IN LIGHT OF RESUMPTION OF SHIPPING TRAFFIC THROUGH SUEZ CANAL, TIN PRICES HIGHER DUE TO FURTHER TENSIONS IN MYANMARSentiment was upbeat on the LME on Friday: 3m copper futures climbed 2.08% to $8,963/tonne, aluminum 2.32% to $2,298/tonne, zinc 1.29% to $2,830/tonne and nickel 1.47% to $16,390/tonne. The main driver of the gains on Friday was strong macro data from China, particularly strong industrial profits, which were up 179% y-o-y. Rising profits likely augurs an increase in industrial output in China, the country responsible for more than half of global base metal demand. This morning, meanwhile, it is being reported that shipping traffic through the Suez Canal has been partially reported. The canal is a thoroughfare for metals and raw materials from Asian mines to Europe. The clearing of the canal has led to a moderate correction in commodity prices: oil and base metals are trading lower. Futures on tin, however, are moving higher for the third straight session, having reached $25,600/tonne. Tin is a critical component in microchips and other computer components. In Myanmar, which is responsible for 13% of global raw tin output and 95% of Chinese tin imports, rising domestic turmoil and a tightening of state of emergency measures have led to 20% of tin capacity having been halted. Further clashes between the government and insurgents - thus triggering a response from the international community - could lead to a decrease in tin supply from Myanmar and thus a further rise in prices.