Commodities Daily - March 9, 2021

> Oil prices, climbing early on news of attack on Saudi oil facilities, ease amid stronger dollar. This morning, Brent is rallying toward $69/bbl, with investors eying the EIA monthly oil market report, the OECD Interim Economic Outlook and the API US stockpiles update overnight. Given that Brent has stabilized around support at $68/bbl, we think the technicals point to a test of the lower bound of the $69.3-70.1/bbl range. An unlikely break below $68/bbl could cause a fall into the $65.8-66.9/bbl range.> Gold rebounds from nine-month low as US yields retreat. Gold touched a nine-month low of $1,680/oz yesterday on the back of Friday's positive US jobs report and the US Senate passing the $1.9 trln Covid-19 relief plan. During today's Asian trading session, gold rebounded from the $1,680/oz level and is now consolidating above $1,690/oz as US 10y Treasury yields have slipped below 1.60%. Today, investors await final eurozone GDP statistics for 2020, the OECD's economic forecast and US NFIB small business optimism for February. Positive eurozone GDP prints could push gold up toward $1,700/oz. We think a break below the $1,680/oz support level looks unlikely today, but should that happen, this could pave the way to $1,670/oz.OIL PRICES, CLIMBING EARLY ON NEWS OF ATTACK ON SAUDI OIL FACILITIES, EASE AMID STRONGER DOLLAR Having finished last week trading in sub-$70/bbl territory, front-month Brent rallied to an intraday high of $71.4/bbl during Asian trading hours yesterday. The catalyst behind this surge was what is being called a Yemeni Houthi attack with drones and missiles on Saudi oil infrastructure on Sunday, including a Saudi Aramco facility at Ras Tanura, the world's largest oil port, capable of exporting roughly 6.5 mln bpd of crude oil and handling over 90% of Saudi crude exports. However, in the end no damage was caused and no disruption to oil flows took place. We highlight that, while there is ample spare production capacity right now, limiting the significance of the geopolitical supply risks, Saudi Arabia is not in any rush to return barrels to the market until a sustained recovery in demand and drawdown in stocks have been confirmed by data. (Meanwhile, the Houthis' claimed links with Iran will make the attack an early test for the Biden administration.)At the start of the day yesterday, oil and other markets across Asia were also supported by strong Chinese economic data, which showed a surge in exports in 2m21, against the backdrop of the $1.9 trln fiscal stimulus bill being passed by the US Senate. The Democratic-led House will vote on the bill today, with President Joe Biden expected to sign it by the weekend. This, along with the strong US jobs report released on Friday, has driven the 10y UST yield higher and boosted the dollar. The rising dollar provided headwinds for oil prices yesterday and front-month Brent eventually settled at $68.24/bbl, $1.12/bbl below the previous settlement.This morning, Brent is rallying toward $69/bbl, with investors eying the EIA monthly oil market report, the OECD Interim Economic Outlook and the API US stockpiles update overnight. Note that US refineries are resuming operations after the cold blast last month and should start consuming more crude, while gasoline demand in California (the biggest US state) is picking up, according to the latest Bloomberg analysis. Given that Brent has stabilized around support at $68/bbl, we think the technicals point to a test of the lower bound of the $69.3-70.1/bbl range. An unlikely break below $68/bbl could cause a fall into the $65.8-66.9/bbl range.GOLD REBOUNDS FROM NINE-MONTH LOW AS US YIELDS RETREATOn Friday, ahead of the Russian public holiday, gold was trading sideways at $1,690-1,700/oz, with the 10y US Treasury yield stuck in a 1.55-1.60% range. Friday's nonfarm payrolls data was the main market driver at the end of the week. They were up 379k last month versus 205k predicted, with the January data revised to show 166k jobs created instead of 49k, as previously reported. This caused some investors to doubt the need for the US stimulus package. However, the labor statistics did not significantly pressure gold, as investors had likely already priced in the positive jobs data. Yesterday, gold slid to the $1,680-1,690/oz range as US Treasury yields climbed above 1.6%. The main driver was that President Joe Biden was on the cusp of his first legislative success, with the House ready to give final passage to his $1.9 trln Covid relief plan, the second-largest economic stimulus in US history. After the Senate passed the legislation on a party-line 50-49 vote on Saturday, House Majority Leader Steny Hoyer said it will be taken up in his chamber on Tuesday. A massive increase in the money supply boosts expectations of monetary policy tightening, in turn pressuring gold. During today's Asian trading session, gold rebounded from the $1,680/oz level and is now consolidating above $1,690/oz as US 10y Treasury yields have slipped below 1.6%. We believe that the strongest negative drivers for gold have played out and a fall below current levels looks unlikely this week while noting that an elevated US CPI inflation reading for February tomorrow could restart the gold correction. Today, investors await final eurozone GDP data for 2020, the OECD's economic forecasts and US NFIB small business optimism for February. Other highlights this week include the US CPI for February tomorrow, US initial jobless claims and the ECB monetary policy statement and press conference on Thursday, and the US PPI for February and EU industrial production for January on Friday. Positive eurozone GDP prints could push gold up toward $1,700/oz. We think a break below the $1,680/oz support level looks unlikely today, but should that happen, this could pave the way to $1,670/oz.