Commodities Daily - May 13, 2021

> Oil holds steady amid mixed IEA report and EIA inventory data, US pipeline restart and tumbling stock markets. This morning, Brent is hovering above $68.5/bbl as investors await April PPI and weekly jobless claims from the US. They are also waiting for an update on when the Colonial Pipeline will come back online following last Friday's cyberattack. We expect falling stock markets and the stronger dollar to drag Brent toward support at $67.2/bbl today, though we think a break below and move toward $65.7/bbl are unlikely.> Gold slides on worries about Fed tightening amid high US inflation. Gold fell from $1,835/oz to $1,820/oz yesterday as the 10y US Treasury yield sharply rose to 1.68%. This came amid the US CPI data for April showing the highest inflation in more than decade - in m-o-m terms, it was 0.8% versus the consensus of 0.2%. During the Asian session today, gold was trading at $1,815/oz. Investors are eyeing a US PPI reading for April and weekly initial jobless claims. Overall, we expect bullion to test support at $1,800/oz today.OIL HOLDS STEADY AMID MIXED IEA REPORT AND EIA INVENTORY DATA, US PIPELINE RESTART AND TUMBLING STOCK MARKETSBrent had gained $1/bbl to trade just above $69/bbl ahead of yesterday's European trading session as oil investors awaited the release of the monthly IEA oil market report. The IEA's updated market outlook contained a downward revision to the agency's global oil demand estimate for this year (down 0.26 mln bpd to 96.43 mln bpd, 5.42 mln bpd above the 91.01 mln bpd average in 2020), which owed to the Covid outbreaks in Brazil, India and Europe, as well as the February freeze in the US. Earlier this week, neither OPEC nor the EIA lowered their 2021 global demand forecasts. The IEA did highlight, however, that "the anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond 2Q21." We agree, which is why we expect Brent to surge toward $75/bbl this summer. Also worth mentioning is that the IEA's preliminary data for April showed that OECD stockpiles fell by 9.3 mln bbl m-o-m to 2,942 mln bbl. Compared to the 2015-19 average (which OPEC+ uses as a benchmark to determine what is a balanced market), total stocks (oil and refined products combined) were at a 21 mln bbl surplus in April, while crude oil stocks were at a 5 mln bbl deficit. Following the IEA report, Brent briefly tumbled below $68.5/bbl, but ahead of the EIA inventory update it pared back these losses and climbed to as high as $69.8/bbl.After the API's reported 2.5 mln bbl crude stock draw, the EIA yesterday registered only a 0.43 mln bbl drop. This came despite a very sharp 2.33 mln bpd decrease in exports to 1.8 mln bpd (we expect a rebound soon), a 0.22 mln bpd decrease in refinery inputs to 15 mln bpd (amid unplanned outages), a 0.1 mln bpd increase in US crude oil production to 11.0 mln bpd and a 0.04 mln bpd increase in imports to 5.49 mln bpd. We note that the Colonial Pipeline outage and the resulting drop in refinery runs along the Gulf of Mexico mean next week's data should show a crude stock build. Yesterday's refined product data was mixed. Gasoline stocks rose 0.38 mln bbl to 236.2 mln bbl (they have been virtually flat for about a month), while distillate stocks fell 1.73 mln bbl to 134.4 mln bbl. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) rose 3.9 mln bbl amid a strong build in propane stocks and the "other oils" category. The total stockpile build amid a tumbling S&P 500 and strong dollar pressured Brent toward $69/bbl, and it eventually settled at $69.32/bbl, $0.77/bbl above the previous settlement.The trigger for the plunge in the S&P 500 and surge in the dollar was yesterday's US inflation data (the CPI surged 0.8% m-o-m in April, the most since 2009), which fueled concerns that inflationary pressure could stifle the economic recovery. This morning, Brent is hovering above $68.5/bbl as investors await April PPI and weekly jobless claims from the US. They are also waiting for an update on when the Colonial Pipeline will come back online following last Friday's cyberattack. We expect falling stock markets and a strong dollar to drag Brent toward support at $67.2/bbl today, though we think a break below and move toward $65.7/bbl are LD SLIDES ON WORRIES ABOUT FED TIGHTENING AMID HIGH US INFLATIONGold fell from $1,835/oz to $1,820/oz yesterday as the 10y US Treasury yield sharply rose to 1.68%, while EUR/USD weakened to 1.207. US CPI data for April showed the highest inflation in more than decade - in m-o-m terms, inflation was 0.8% versus the consensus of 0.2%. Meanwhile, in y-o-y terms the CPI rose 4.2% after 2.6% in March and versus the 3.6% consensus. This failed to support bullion quotes yesterday, as investors were concerned about potential Fed tightening in response to the high inflation. Fed Vice Chairman Richard Clarida said he was "surprised" by the reading, but reiterated the Fed's dovish stance, adding that more time is needed to let the economy recover.During the Asian session today, gold was trading at $1,815/oz. Investors are eyeing a US PPI reading for April and weekly initial jobless claims. As happened yesterday, the former could add fuel to the Fed tightening concerns and thus pressure bullion today, though an unexpectedly weak jobless claims number could support gold. Overall, we expect bullion to test support at $1,800/oz today, while a rebound toward the $1,835/oz resistance level seems