Commodities Daily - March 3, 2021

> Oil remains under pressure; US inventory data eyed ahead of OPEC+ JMMC meeting. After rising to $64/bbl midday yesterday, Brent slid back into the $62.5-63.0/bbl range during US trading hours amid growing anticipation that OPEC+ will decide to hike production this week. This morning, Brent has been hovering near $63/bbl, following API data overnight showing a 7 mln bbl build in US crude stocks last week. Today, investors will eye the weekly EIA inventory data from the US and the results from the OPEC+ Joint Ministerial Monitoring Committee meeting, which could shed light on the group's thinking ahead of Thursday's full meeting. From a technical perspective, Brent is still prone to a correction toward $61.1/bbl, although we think it is most likely to hold above $62.4/bbl, which is yesterday's and today's intraday low.> Gold steadies amid weak dollar; US ADP employment report eyed. Gold found support yesterday from a eurozone core CPI reading of 1.1% y-o-y for February and US Fed Governor Lael Brainard's comments that the US economy remains far from its employment and inflation targets. It eventually settled at $1,738/oz. As we write, it is hovering near the $1,730/oz mark. Today, investors will eye the US ADP employment report ahead of Friday's nonfarm payrolls data. The Fed's beige book, global services PMIs and the eurozone PPI are also due today. We expect gold to test support at $1,720/oz today, with a break below paving the way to $1,700/oz, while the ADP jobs report for February likely to show an increase in hiring. A surge above $1,740/oz, albeit unlikely, would open the way to $1,760/oz.OIL REMAINS UNDER PRESSURE; US INVENTORY DATA EYED AHEAD OF OPEC+ JMMC MEETINGAfter trading in the $62.5-63.0/bbl range early yesterday, front-month Brent surged to $64/bbl and then traded sideways in the $63.5-64.0/bbl corridor for most of the European session. During the US trading hours, however, it slid back to $62.5/bbl before eventually settling at $62.7/bbl, $0.99/bbl below the previous settlement. Expectations that OPEC+ will ease its supply curbs continued to weigh on oil prices. Yesterday, OPEC Secretary-General Mohammad Barkindo remarked to the OPEC+ Joint Technical Committee that "the days of GDP and oil demand figures being in the red because of the pandemic-induced shock appear to be behind us." This suggests that OPEC's oil market outlook is generally positive. It also suggests that OPEC+ is likely to hike production in 2Q21, as does a report from Reuters that Abu Dhabi National Oil Company has told Asian buyers that it plans to increase crude allocations in April.Overnight, the API reported a 7 mln bbl build in US crude stocks last week to 476 mln bbl. This came amid a strong 1.75 mln bpd decrease in refinery inputs and a 0.63 mln bpd increase in imports. Crude oil stocks at Cushing were up by 0.73 mln bbl. The refined product data, on the other hand, was extremely bullish, showing a massive 9.9 mln bbl drop in gasoline stocks and 9.1 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 1.3 mln bbl crude stock draw, 2.5 mln bbl decrease in gasoline stocks and 3.75 mln bbl drop in distillate stocks.This morning, Brent remains under pressure and has been hovering near $63/bbl despite the dollar's retreat yesterday. Today, investors will eye the weekly EIA inventory data from the US and the results from the OPEC+ Joint Ministerial Monitoring Committee meeting, which could shed light on the group's thinking ahead of Thursday's full meeting. The JMMC could even make an official recommendation on how to proceed with production quotas. There are two distinct elements of the forthcoming production increase that will be debated. The first is whether the cartel should proceed with a 0.5 mln bpd collective output hike in April, and the second is how Saudi Arabia will phase out its voluntary 1 mln bpd supply reduction for February and March.Meanwhile, the massive disruptions to refining and crude oil production in the US caused by the extreme cold weather in late February will continue to distort the EIA inventory data, much as we saw with yesterday's API data. We think the EIA will show an even stronger crude stock build than the API, which could provide headwinds for oil prices even if the refined product data is very upbeat. From a technical perspective, Brent is still prone to a correction toward $61.1/bbl, although we think it is most likely to hold above $62.4/bbl, which is yesterday's and today's intraday low.GOLD STEADIES AMID WEAK DOLLAR; US ADP EMPLOYMENT REPORT EYEDGold touched an eight-month low of $1,710/oz yesterday before clawing back to the $1,720-1,740/oz range, as EUR/USD firmed to 1.208 after sliding below 1.200. The 10y US Treasury yield stabilized at 1.40-1.44%, slightly easing the pressure on gold. Federal Reserve Governor Lael Brainard yesterday said it would take some time to meet the conditions for economic progress laid out by the US central bank (full employment and consistent 2% inflation) before reducing the pace of its massive asset purchases, while she noted that recent bond market volatility could cause a further delay in this process. The eurozone core CPI for February came in at 1.1% y-o-y, down from 1.4% y-o-y in January. This fueled the view that the eurozone's economic recovery is lagging the US recovery, though it failed to deter euro and gold bulls, as yield and dollar movements remain the main market motor. Gold is attempting to hold above the $1,730/oz mark as we write. The market appears to have stabilized for a while, but the main focus is shifting to the US nonfarm payrolls data on Friday, for which signs of a rapid improvement could trigger another drop in gold. Today, investors will eye the US ADP employment report for February, ahead of the nonfarm payrolls data. For the ADP report, the consensus is calling for a rise of 200k, 26k above the previous reading. We caution that a significant improvement in employment could force investors to resume pricing in the Fed tightening monetary policy sooner than anticipated, which would lift 10y US Treasury yields and in turn weigh on gold. The Fed's beige book, global services PMIs and the eurozone PPI are also due today. We expect gold to test support at $1,720/oz today, with a break below paving the way to $1,700/oz, while the ADP jobs report likely to show an increase in hiring. A surge above $1,740/oz, albeit unlikely, would open the way to $1,760/oz.