Commodities Daily - May 11, 2021

> Oil prices slide, as largest US oil-product pipeline set to come back online by the end of the week. This morning, Brent is trading near $67.7/bbl. The monthly OPEC and EIA oil market reports are out today, while the API's update on US oil and refined product inventories is due overnight. Given its currently negative momentum, Brent could be headed toward support at $67.3/bbl later today, with an unlikely break below potentially taking it as low as $65.7/bbl. In our view, only a climb back above $69.2/bbl, which so far seems unlikely to happen in the near future, would point toward a continuation of the uptrend toward $71.4/bbl.> Gold rallying amid disappointing US data. Gold gained almost $70/oz to $1,835/oz since the beginning of May (Russia is returning from holiday only today) as the pace of the US economic recovery has fallen short of expectations. During the Asian trading session today, gold was steady at $1,835/oz. Today, investors are eyeing the eurozone ZEW sentiment index for May and NFIB small business optimism for April. Gold looks set to retest resistance at $1,845/oz today (support is at $1,820/oz).OIL PRICES SLIDE, AS LARGEST US OIL-PRODUCT PIPELINE SET TO COME BACK ONLINE BY THE END OF THE WEEKAfter trading just above $69/bbl during trading in Asia yesterday, front-month Brent slid to $68.5/bbl and then traded sideways in the $68.5-69.0/bbl range before tumbling to as low as $67.4/bbl in the early US trading hours. Oil fell as traders closely monitored the growing impact on demand for crude of the closure of the largest US oil-product pipeline and subsequent crop in refining activity. However, yesterday Colonial Pipeline Company, a key supplier of refined products from US Gulf Coast refineries to the eastern US, said that its 2.5 mln bpd pipeline network would be mostly back online by the end of this week following a cyberattack. The disruption along the Colonial Pipeline, which began on May 8, has limited the flow of clean products from the Gulf Coast and is likely to force major refineries east of Port Arthur, Texas to cut back on runs for as long as they are unable to access the oil product distribution system. Some refineries in Louisiana and eastern Texas have already trimmed runs by 20-25% in order to manage their product inventories while the pipeline is unable to receive oil products. In our view, the reduction in US refinery runs was likely around 0.6 mln bpd over the weekend and could easily grow to 1 mln bpd this week. The outage has already triggered what should be a short-lived spike in US gasoline futures, as Colonial's CEO warned that supply shortages may occur. We would like to highlight that the attack is already mostly priced into WTI calendar spreads and the WTI-Brent spread, both of which have fallen around 10 cents per barrel since last week and are unlikely to remain highly volatile if the outage doesn't last too long. Nonetheless, flat Brent and WTI prices could come under further pressure. If the outage turns out to be prolonged, already-high refined product stocks on the US Gulf Coast (due to lackluster exports to Latin America) would be pushed even higher, which will pressure refining margins, leading to a further drop in refinery runs. This would push crude stockpiles higher, thus weighing on prices at a time when exports are still struggling.This morning, Brent is trading near $67.7/bbl. The monthly OPEC and EIA oil market reports are out today, while the API's update on US oil and refined product inventories is due overnight. Tomorrow, the IEA will release its monthly outlook. Investors will pay close attention to the demand estimates given how uneven the global recovery has been, with consumption roaring back in China and the US but receding in virus-ravaged India. Last month, all three agencies raised their demand projections. Given its currently negative momentum, Brent could be headed toward support at $67.3/bbl later today, with an unlikely break below potentially taking it as low as $65.7/bbl. In our view, only a climb back above $69.2/bbl, which so far seems unlikely to happen in the near future, would point toward a continuation of the uptrend toward $71.4/ LD RALLYING AMID DISAPPOINTING US DATAGold has gained almost $70/oz to $1,835/oz since the beginning of May (Russia is returning from holiday only today) as the pace of the US economic recovery has fallen short of expectations. The US 10y Treasury yield has traded sideways in a range of 1.48-1.68%. Meanwhile, EUR/USD appreciated to 1.214, which supported gold. At the beginning of last week, the ISM PMIs for April were down versus March, which was positive for gold. In the middle of the week, the US ADP employment report was published, with private payrolls up 742k versus a 565k expansion in March. This pressured gold and led to a consolidation before Friday's official jobs report, which disappointed with a 266k nonfarm payroll expansion in April versus a 1 mln gain expected. This comes after a strong 1Q21 economic performance and means that further monetary policy tightening by the Fed could face doubts. Against this backdrop, gold rose and broke through resistance at $1,800/oz. Yesterday, Chicago Fed officials indicated that higher inflation and wage growth and employment (NFP) gains of 1 mln per month should be seen before changes to the current monetary policy should be considered.During the Asian trading session today, gold was steady at $1,835/oz. Investors are awaiting US CPI data for April tomorrow and US PPI data on Thursday. In addition, industrial production for the eurozone and US (for March and April, respectively), US retail sales for April and US initial weekly jobless claims are due this week. Today, investors are eyeing the eurozone ZEW sentiment index for May and NFIB small business optimism for April. Gold looks set to retest resistance at $1,845/oz today (support is at $1,820/oz)