Commodities Daily - May 19, 2021

> Oil prices slide amid Iran nuclear deal talks. Yesterday, Brent slid from $70/bbl to $68/bbl as the oil market followed the talks between world powers on reviving the Iran nuclear deal. Today, investors will be focused on the EIA inventory update. In our view, the risks are on the bearish side, with the report likely to show a stronger build in crude stocks than the API reported yesterday. Against this backdrop, we see Brent today sliding toward the $67/bbl mark.> Gold steady ahead of FOMC minutes. Gold traded sideways near $1,870/oz yesterday, while the 10y US Treasury yield was stuck in a 1.64-1.65% range. Yesterday's April housing starts and building permits data from the US came in below expectations. Today, during trading in Asia, gold remained near $1,870/oz. The highlights on today's macro agenda are the FOMC minutes and April CPI data from the eurozone. We think gold may test resistance at $1,875/oz today.OIL PRICES SLIDE AMID IRAN NUCLEAR DEAL TALKSYesterday, Brent slid from $70/bbl to $68/bbl as the oil market followed the talks between world powers on reviving the Iran nuclear deal. A return to the 2015 agreement could pave the way for the removal of US sanctions and a rise in Iranian crude exports by around 1.0-1.5 mln bpd at a time when OPEC+ is already loosening output curbs. Yesterday, oil prices fell after comments from a Russian representative that significant progress had been made at the talks. This decline was later pared after the same representative played down reports that a major announcement would be made today. The announcement of a deal, in our view, would certainly hit sentiment and pressure prices, though we think that the potential reintroduction of Iranian barrels into the market in 3Q21 (we have been assuming in 4Q21) will not be a game-changer. Demand in 2H21 is likely to exceed supply by up to 3 mln bpd, which means there should be plenty of room for extra barrels.This morning, Brent remains under pressure as the API US weekly inventory report showed a rise in US crude stockpiles (up 0.62 mln bbl last week), while gasoline and distillate inventories dropped (down 2.84 mln bbl and 2.58 mln bbl, respectively). Today, investors will be focused on the EIA inventory update. In our view, the risks are on the bearish side, with the report likely to show a stronger build in crude stocks than the API reported. Against this backdrop, we see Brent today sliding toward the $67/bbl LD STEADY AHEAD OF FOMC MINUTESGold traded sideways near $1,870/oz yesterday, while the 10y US Treasury yield was stuck in a 1.64-1.65% range. EUR/USD climbed to 1.222, which supported bullion prices. Yesterday's housing data from the US was on the weaker side. Housing starts fell 9.5% in April versus an expected drop of only 2%, while building permits increased by only 0.3% in April versus the anticipated 0.6% increase. However, gold showed little reaction to these releases. On the other side of the Atlantic, the eurozone reported a 0.6% drop in GDP in 1Q21 in Q-o-Q terms and a 1.8% drop in y-o-y terms, which was about what was expected. Gold didn't react much to this data either. It seems that gold prices and US Treasuries are waiting to take their cue from the April FOMC minutes, which are due today and could clarify the Fed's view on inflation and the ongoing economic recovery.During the Asian session today, gold traded near $1,870/oz. Investors are keeping an eye out for April CPI data from the eurozone, but the highlight on today's agenda is the Fed minutes. Judging from the latest speeches and comments from Fed representatives, the Fed intends to maintain its dovish stance until it believes the labor market is close to a full recovery, and it so far seems to believe that the rise in inflation will prove transitory. We don't expect the FOMC minutes to reveal anything that would really alter the picture. We think gold may test resistance at $1,875/oz today, while a drop toward support at $1,820/oz seems