Commodities Daily - May 20, 2021

> Oil prices tumble amid stock market drop, rise in US oil inventories. Today, investors will eye US weekly jobless claims data and the Philadelphia Fed manufacturing index for May. In our view, the risks of retesting yesterday's lows are material given the current global market backdrop, although given what we expect to be upbeat US macro data, we do not think that Brent will fall below $65.5/bbl.> Gold drops after FOMC minutes. Gold failed to consolidate above resistance at $1,875/oz yesterday following the release of FOMC minutes pointing to a hawkish turn among certain committee members, while the 10y US Treasury yield climbed to around 1.67%. The eurozone CPI data for April was in line with expectations, the m-o-m gauge printing at 0.6%. During the Asian session today, gold attempted to pare its losses but held close to the $1,875/oz mark. Investors await a speech from ECB President Christine Lagarde and US initial jobless claims data. We think gold may be set to retest resistance at $1,890/oz today.OIL PRICES TUMBLE AMID STOCK MARKET DROP, RISE IN US OIL INVENTORIESYesterday, Brent slid from $68/bbl to as low as $65.5/bbl, its lowest level in three weeks. This came alongside a broader stock market decline and concern among traders about growing oil supply from the US and Iran. A top EU official said the US and Iran are close to reviving the nuclear deal, which would allow more crude flows from the OPEC producer. The possibility of more supply is being reflected in the prompt calendar spread for Brent, the backwardation structure of which is narrowing. This is an indication that market tightness may be easing. Oil price headwinds also came from the S&P 500 Index extending its decline after the minutes from the Federal Reserve's April policy meeting that showed the possibility of a debate on scaling back asset purchases.Yesterday's EIA data provided the first look at the impact of the Colonial Pipeline outage. Crude inventories rose by 1.3 mln bbl (less than expected because exports nearly doubled), while nationwide gasoline inventories fell nearly 2 mln bbl last week. As expected, gasoline inventories in the Gulf Coast saw a huge build and hit their highest levels since August owing to barrels stranded by the Colonial pipeline outage. Unable to get Gulf Coast supplies, runs at East Coast refineries were ramped up to their highest level since June 2019, while inventories were also tapped. Stocks of gasoline on the US East Coast shrunk by 4.58 mln bbl, despite a strong inflow of foreign barrels. A very important highlight from the report is that as the economy reopens and amid a bit of panic buying related to the shutdown of Colonial, we saw a big jump in gasoline demand. Weekly demand was 9.2 mln bpd, the highest since March 2020, which implies a very strong driving season this summer.Later in the day, Brent pared back yesterday's losses and this morning is hovering below $67/bbl. Today, investors will eye US weekly jobless claims data and the Philadelphia Fed manufacturing index for May. In our view, the risks of retesting yesterday's lows are material given the current global market backdrop, although given what we expect to be upbeat US macro data, we do not think that Brent will fall below $65.5/ LD DROPS AFTER FOMC MINUTESGold failed to consolidate above $1,875/oz yesterday, while the 10y US Treasury yield climbed to 1.67%. EUR/USD slipped from 1.222 to 1.217, which created headwinds for gold prices. In the middle of the day, the April CPI data for the eurozone was published. The m-o-m gauge came in at 0.6% and the y-o-y gauge at 1.6%, both matching the consensus forecast. The inflation data therefore had no material impact on the euro or bullion. Later on, in the lead-up to the publication of the minutes from the April FOMC meeting, gold climbed to a test of resistance at $1,890/oz. However, after the minutes were published it fell from a four-month high near $1,890/oz and went on to finish the day near $1,870/oz. This is because the FOMC minutes indicated that certain committee members had turned more hawkish in light of the improvement in the economy and the surge in inflation and suggested that the Fed should start discussing a possible rollback of asset purchases at its upcoming meetings. However, overall the Fed maintained a dovish policy stance, indicating that the recent pickup in inflation was most likely transitory in nature and that the labor market had yet to fully recover.During the Asian session today, gold traded near $1,875/oz. Investors are keeping an eye out for a speech from ECB President Christine Lagarde, who might offer some comments on the sharp rise in yields on sovereign bonds within the eurozone, which has caused the euro to strengthen recently. Weekly US jobless claims are also on today's agenda. All in all, we think gold may be set for another test of resistance at $1,890/oz