Commodities Daily - May 25, 2021

> Brent gains to start the week amid oil demand optimism, while Iranian talks to continue today. Yesterday's prevailing bullish sentiment and strong price gains have pushed Brent toward the $68.8/bbl resistance level, which, if broken, would open the path back toward the high reached last week of $70.24/bbl. In our view, Brent is likely to continue rising toward $70/bbl today amid what should be upbeat US macro data releases. We think the reintroduction of Iranian oil barrels into the global market was mostly priced in last week, when Brent slid more than $5/bbl.> Gold trades sideways despite ease in Treasury yields. Gold traded sideways in a $1,875-1,885/oz range yesterday as the 10y US Treasury yield inched 2 bps lower to near 1.60%. During the Asian session today, gold traded near $1,875/oz. Today, investors are eyeing the FHFA house price index and S&P/Case-Shiller home price index for March, US new home sales for April and Conference Board consumer confidence for May. We think gold is likely to test support near $1,860/oz today, with a push to the $1,890/oz resistance level unlikely.BRENT GAINS TO START THE WEEK AMID OIL DEMAND OPTIMISM, WHILE IRANIAN TALKS TO CONTINUE TODAYYesterday, front-month Brent rallied from $66.5/bbl to $68.6/bbl, supported by optimism about a recovery in oil demand in 2H21 in the US, Europe and China as the pandemic eases. In particular, more than 60% of US adults have already received at least one vaccine dose, and new coronavirus cases rose just 0.5% over the past week, the slowest rise since March 2020. In addition, the US driving season will soon go into full swing, starting with the upcoming Memorial Day holiday. Meanwhile, Indian infection rates are still high, but attention has been called to the recent decline in deaths, which has bolstered expectations that Indian oil demand could rise in coming weeks. This morning, Brent is carrying through yesterday's positive momentum and is closing in on the $69/bbl mark as investors await US April new home sales, May consumer confidence, the weekly API update on US oil and refined product inventories, and the start of the fifth round of indirect US-Iran nuclear talks in Vienna. Tehran said yesterday that obstacles to reaching a deal remain, but that its diplomats were pressing to get one done. As part of the process, Iran agreed to extend a key nuclear-monitoring pact with the UN, clearing the way for more time for the talks. It looks like a US-Iran deal is more likely than not before the Iranian presidential election on June 18. This would effectively mean that Iranian oil production will increase slowly starting in July, when Iran will be able to unwind onshore and floating storage. We note that if the Biden administration deems that the agreement must be reviewed by Congress under the Iran Nuclear Agreement Review Act of 2015 (we think it will), the US cannot waive sanctions for at least 60 days from any deal date. Ultimately, if demand picks up from June, as we expect, driven by China, the US and Europe, the market will need Iranian barrels, especially since we expect OPEC+ to hold off on any more output increases after the planned July raise given last week's price slump.Yesterday's prevailing bullish sentiment and strong price gains have pushed Brent toward the $68.8/bbl resistance level, which, if broken, would open the path back toward the high reached last week of $70.24/bbl. In our view, Brent is likely to continue rising toward $70/bbl today amid what should be upbeat US macro data releases. We think the reintroduction of Iranian oil barrels into the global market was mostly priced in last week, when Brent slid more than $5/ LD TRADES SIDEWAYS DESPITE EASE IN TREASURY YIELDSGold traded sideways in a $1,875-1,885/oz range yesterday as the 10y US Treasury yield inched 2 bps lower to near 1.60%. Meanwhile, EUR/USD appreciation to 1.221 also supported bullion. The Chicago Fed National Activity Index for April was reported at 0.24 points after 1.71 in March (and off the consensus by 1.00 point), which could indicate a slowing of the economic recovery, but this failed to create much support for gold prices. Meanwhile, St Louis Fed President James Bullard said yesterday that he expects inflation to be above 2% this year and next. He also mentioned that the Fed was not yet ready to start discussing tapering of asset purchases. Despite these dovish remarks, gold declined, which could indicate that market participants have a different view. In addition, IHS Markit released GDP forecasts, seeing 5.7% growth in 2021 for the global economy and 6.7% growth in the US. Overall, risk appetite picked up yesterday, including for cryptocurrencies, and the S&P 500 traded higher, creating headwinds for bullion.During the Asian session today, gold traded near $1,875/oz. Today, investors are eyeing the FHFA house price index and S&P/Case-Shiller home price index for March, US new home sales for April and Conference Board consumer confidence for May. We think gold is likely to test support near $1,860/oz today, with a push to the $1,890/oz resistance level