Commodities Daily - May 17, 2021

> Oil prices climb as dollar weakens, stock markets recover. This morning, Brent is hovering below $69/bbl as investors digest macro data out of China, including official retail sales and industrial production. In our view, today Brent is likely to continue trading within the $68.1-69.2/bbl technical range. > Gold rises amid a weak batch of US macro data. Gold rose to just below $1,845/oz on Friday as the 10y US Treasury yield declined to 1.63%. One driver was a weak batch of April macro data from the US, with both industrial production and retail sales missing expectations. During the Asian session today, gold was trading close to $1,855/oz. The highlight on today's sparse macro calendar is the May reading of the Empire State manufacturing index. We think gold may be set to test resistance at $1,875/oz today.OIL PRICES CLIMB AS DOLLAR WEAKENS, STOCK MARKETS RECOVERAt the start of the day on Friday, front-month Brent was trading within a range of $66.5-67.0/bbl. In the early European trading hours, however, it surged to $68.0/bbl and later during the Wall Street session rallied to as high as $68.9/bbl. It eventually settled at $68.71/bbl, $1.66/bbl above the previous settlement. The gains were accompanied by dollar weakening and a rebound in major stock indexes, which earlier last week had suffered strong losses. The S&P 500 in particular advanced as investors assessed what the drop in base metal prices could mean for US inflation. Concerns over accelerating US inflation had been stoked on Wednesday after Labor Department data had showed CPI inflation in April at the highest level since 2009. Friday's drop in base metal prices helped allay the market's anxiety and bolstered the bull case that the inflation pickup is more transitory than structural. In addition, US April retail sales, released on Friday, came in softer than forecast, though elevated savings are expected to support strong household spending for the remainder of the year.This morning, Brent is hovering below $69/bbl as investors digest macro data out of China, including official retail sales and industrial production for April. Based on this data, Bloomberg estimates that China's oil demand (oil processing volume plus net imports of refined petroleum oil) rose 9.7% to 12.96 mln bpd in April, which is providing oil price tailwinds as we write. Today, market players will be eyeing the EIA drilling productivity report and the US shale production forecast for June in particular. In our view, today Brent is likely to continue trading within the $68.1-69.2/bbl technical range. Besides the Chinese data that will be coming out throughout the week, market players will be focused on the weekly US inventory updates, with the numbers to be considerably off because of the Colonial pipeline shutdown last week. In our view, this week Brent will keep trying to break above the $70/bbl mark. Note that the premium of the front-month contract against the next month expanded on Friday to its widest level in over a week. The rising backwardation suggests the market is expecting tighter LD RISES AMID A WEAK BATCH OF US MACRO DATAGold rose to just below $1,845/oz on Friday as the 10y US Treasury yield declined to 1.63% and EUR/USD edged up to 1.214. One driver was a weak batch of April macro data from the US - retail sales were flat m-o-m, below the consensus of 1% growth, while industrial production was up 0.7% m-o-m, also below expectations of a 1% increase. In addition, the University of Michigan consumer sentiment index slipped from 88.3 in April to 82.8 in May. The weak data pushed gold prices to their highest levels in more than three months as investors priced in a more dovish stance from the Fed than previously anticipated, due to the apparent setback in the US economy. On the other hand, gold was supported by increased concerns over Covid-19, as both Singapore and Taiwan introduced new restrictions and India's daily cases remained above 300k.During the Asian session today, gold rose to $1,855/oz. The latest FOMC minutes are due on Wednesday, while ECB President Christine Lagarde will deliver a speech tomorrow. This week will also see the release of 1Q21 GDP data from the eurozone; April CPI data from the EU; April housing starts, existing home sales and building permits from the US; weekly jobless claims from the US; and Markit PMIs from a range of DMs (on Friday). The highlight on today's sparse macro calendar is the May reading of the Empire State manufacturing index, for which the consensus estimate is 24. We think gold may test resistance at $1,875/oz today, while a move to the support level near $1,820/oz seems