Commodities Daily - May 27, 2021

> Oil holds steady despite upbeat EIA inventory report. Today, investors will focus on data from the US including the second 1Q21 GDP print, weekly jobless claims and April durable goods orders, along with the release of the North Sea loading program for July. From a technical perspective, Brent looks set to retest support at $68.1/bbl today, with a break below likely resulting in a fall to support at $67.4/bbl. However, we do not think this is in the cards, as we expect the macro data from the US to be upbeat. This could push Brent to retest resistance at $69.2/bbl and perhaps continue onward toward $70.2/bbl.> Gold in correction amid Treasury yields rebound. Gold ended the day yesterday slightly above $1,895/oz, as the 10y US Treasury yield ticked higher to 1.58%. In comments yesterday Fed Vice Chairman Randal Quarles indicated that he is ready to begin discussing reducing the pace of the bond-purchasing program. Gold has been hovering near $1,900/oz in Asian trading this morning. Today, investors will be eyeing the second reading of US GDP for 1Q21, durable goods orders, pending home sales (both for April), and initial jobless claims. We think gold is likely to retest support at $1,890/oz today.OIL HOLDS STEADY DESPITE UPBEAT EIA INVENTORY REPORTAfter rising to $69.2/bbl early yesterday, Brent slipped toward $68/bbl and was trading near $68.3/bbl ahead of the EIA weekly inventory report. Following the API's reported 0.44 mln bbl crude draw a day earlier, the EIA yesterday registered a bigger draw of 1.66 mln bbl to 484.4 mln bbl. This came amid a 0.14 mln bpd drop in imports to 6.27 mln bpd, a 0.13 mln bpd rise in exports to 3.43 mln bpd and a 0.12 mln bpd increase in refinery inputs to 15.24 mln bpd. US crude production remained flat at 11.0 mln bpd. The refined product data was also bullish. Gasoline stocks fell 1.75 mln bbl to 232.5 mln bbl, while distillate stocks were down 3 mln bbl to 129.1 mln bbl. Gasoline inventories fell to their lowest level since late March due largely to a bump in demand, as the vaccine roll-out has continued and the weather has improved. The four-week average level of US gasoline demand reached the highest since late March 2020. We note that gasoline imports are likely to continue pressuring the economics for gasoline refining, but a recovery in demand as more US states ease restrictions should further bolster optimism, in our view. Meanwhile, diesel stockpiles also declined, for a seventh straight week, with demand for diesel hitting its highest level since early March on the back of warehouse resupply. The global outlook for diesel demand has been weaker due to the Covid impact. The increase in both air travel and consumption in the US has not been widely replicated across the globe, keeping US exports well below historical levels. Asia also remains a concern, as China and India continue to ship more distillate products to foreign markets. Total commercial petroleum stockpiles (oil and refined products combined, excluding strategic petroleum reserves) fell 7.67 mln bbl, also amid a strong draw in the "other oils" category. In our view, the drawdown in total stockpiles in the US will continue through most of the summer (amid the traditional summer driving season), supporting prices.After the release of this upbeat report, Brent rebounded toward $69/bbl and eventually settled at $68.87/bbl, $0.22/bbl above the previous settlement. This morning, Brent slid slightly below $68.5/bbl amid concern that the market could face a flood of Iranian barrels if sanctions are lifted. Traders await details on the Iranian nuclear deal negotiations, including what the sticking points are and when Iran's official oil exports might start to pick up. OPEC+ ministers will meet June 1 to discuss the state of the market and production policy. Some analysts think that the talks with Iran will result in OPEC+ sticking to its plan to raise output again in June but rethinking the planned hike in July. We, however, think the OPEC+ production hikes in June (+0.7 mln bpd) and July (+0.84 mln bpd) will remain in place, bringing the total output cut to 6.6 mln bpd and then 5.7 mln bpd.Today, investors will focus on data from the US including the second 1Q21 GDP print, weekly jobless claims and April durable goods orders, along with the release of the North Sea loading program for July. From a technical perspective, Brent looks set to retest support at $68.1/bbl today, with a break below likely resulting in a fall to support at $67.4/bbl. However, we do not think this is in the cards, as we expect the macro data from the US to be upbeat. This could push Brent to retest resistance at $69.2/bbl and perhaps continue onward toward $70.2/ LD IN CORRECTION AMID TREASURY YIELDS REBOUNDGold ended the day yesterday slightly above $1,895/oz, as the 10y US Treasury yield ticked higher to 1.58%, which increased the opportunity cost of holding non-yielding bullion. EUR/USD slid to 1.219, which created additional headwinds for gold. In comments yesterday Fed Vice Chairman Randal Quarles indicated that he is ready to begin discussing reducing the pace of the bond-purchasing program. Meanwhile, he mentioned that inflation pressure will likely decline over time and that he doesn't expect to see inflation reminiscent of the 1970s. This comes on the heels of comments by other Fed officials that discussions of tapering asset purchases could occur at upcoming meetings. Meanwhile, support for bullion yesterday came from the 5y US Treasury auction, where the bid-cover ratio was 2.5 and the bonds priced at a yield of 0.788%, below the previous 0.849%.Gold has been hovering near $1,900/oz in Asian trading this morning. Today, investors will be eyeing the second reading of US GDP for 1Q21, durable goods orders, pending home sales (both for April) and initial jobless claims. The consensus for the second reading of GDP is 6.5%, following a first reading of 6.4%, while initial jobless claims are expected to post a further decline. If these data points match expectations, bullion may retest support at $1,890/oz today, while a move above resistance at $1,910/oz seems