Commodities Daily - May 26, 2021

> Oil stabilizes, US oil and refined product inventories in focus. Today, investors will be eyeing the EIA US inventory data, which we believe should show a larger crude draw than that reported by the API overnight and similar draws in gasoline and diesel inventories. Brent has the potential, in our view, to break above the $68.8/bbl resistance level today and to start rallying toward the recent, May 18 high of $70.24/bbl, driven by what we expect to be an upbeat EIA report.> Gold rose while Treasury yields slipped yesterday. Gold rose to $1,900/oz yesterday as the 10y US Treasury yield slid to 1.57%, its lowest level in a month. US consumer confidence and new home sales both came in below expectations. During the Asian session today, gold was trading slightly above $1,900/oz. Investors are looking ahead to a speech by Fed Vice Chairman Randal Quarles today. All in all, we think bullion is likely to test support at $1,890/oz today.OIL STABILIZES, US OIL AND REFINED PRODUCT INVENTORIES IN FOCUSYesterday, Brent traded around the $68.5/bbl mark in a low-volatility session. Investors weighed signs of an improving oil demand outlook in some regions against the prospect of more crude supply from Iran (should the nuclear deal be revived). Supporting the upbeat demand outlook was yesterday's US May consumer confidence data, which, though it showed a m-o-m dip for the first time this year (reflecting less optimistic expectations about future employment and income), remained near a 14-month high. Meanwhile, Bloomberg reported that the Iran negotiations are focused on the issues of US sanctions and Iran's advanced enrichment technologies. Yesterday, Brent settled at $68.65/bbl, $0.19/bbl above the previous settlement.Iran now holds up to 40 mln bbl of crude and condensate inventory in domestic floating storage, another 30 mln bbl bonded in China and almost 60 mln bbl in domestic onshore storage. Iran could supply about 1-2 mln bpd if a deal is struck and sanctions are lifted, with production, in our view, starting to rise in July. If demand picks up starting in June, as the market envisages, then these Iranian barrels will be needed, especially as OPEC+ will likely hold off on any more output increases after the planned July raise.Meanwhile, the planned OPEC+ production increases were reflected in the latest Urals loading program, which showed that exports from the Baltic in June will rise 11.4%, according to Reuters. Russia is planning to ramp up seaborne oil exports as pipeline supplies to Belarus are down because of US sanctions imposed on the Naftan refinery and planned maintenance at the Mozyr refinery.This morning, Brent is hovering above $68.5/bbl, with the API overnight reporting draws in US stockpiles of crude oil (down 4.4 mln bbl w-o-w), gasoline (down 1.99 mln bbl) and distillates (down 5.14 mln bbl). Today, investors will be eyeing the EIA US inventory data, which we believe should show a larger crude draw than that reported by the API and similar draws in gasoline and diesel inventories. Brent has the potential, in our view, to break above the $68.8/bbl resistance level today and to start rallying toward the recent, May 18 high of $70.24/bbl, driven by what we expect to be an upbeat EIA LD ROSE WHILE TREASURY YIELDS SLIPPED YESTERDAYGold rose to $1,900/oz yesterday as the 10y US Treasury yield slid to 1.57%. EUR/USD climbed above 1.225, reaching its highest level since January, which also supported bullion prices. Yesterday's macro data from the US was on the weaker side. New home sales came in at 863k in April versus an expected 950k, while the Conference Board's consumer confidence index for May printed at 117.2, slightly below the consensus of 118.8. Gold responded positively to both of these releases. Meanwhile, Fed Vice Chairman Richard Clarida reiterated the Fed's dovish stance, which was encouraging to gold investors, but he also mentioned that the Fed could soon start to discuss reducing its asset purchases. Another source of support for bullion yesterday was the 2y US Treasury auction, where demand was quite high - the bonds priced at a yield of 0.152%, well below the previous 0.175%.During the Asian session today, gold traded near $1,900/oz. Investors await comments from Fed Vice Chairman Randal Quarles on the economic outlook and monetary policy during a discussion at the Brookings Institution. We think gold may test support at $1,890/oz today, while a move above resistance at $1,910/oz seems