Commodities Daily - May 31, 2021

> Oil holds steady ahead of OPEC+ ministerial meeting tomorrow. This morning, Brent is hovering above $69/bbl following upbeat official May PMI data from China. Investors are focused on the OPEC+ supply policy meeting tomorrow and are on the lookout for any comments hinting at the prospects for the return of Iranian supply. Today, there are holidays in the US and UK, so we expect trading to be muted, with Brent likely to remain stuck below $70/bbl. However, the benchmark could begin to target the $70.4-71.0/bbl range, while on the downside there is a $68.8-69.20/bbl support zone.> Gold climbs above $1,900/oz following US macro data. Gold ended Friday's trading at $1,905/oz, while the 10y US Treasury yield declined to 1.59% and EUR/USD hovered near 1.219. The US core PCE reading for April came in slightly above expectations. During the Asian session today, bullion was hovering near $1,905/oz. Today, investors await OECD's updated economic outlook. The US market will be closed for the Memorial Day holiday. We think that gold is likely to trade in a range of $1,890-1,910/oz today.OIL HOLDS STEADY AHEAD OF OPEC+ MINISTERIAL MEETING TOMORROWOn Friday, Brent traded within a narrow $69.3-69.9/bbl range, supported by robust US economic data just ahead of the US Memorial Day weekend, which kicked off the country's summer driving season. Friday's data added to the string of positive releases last week, highlighting the strength of the post-Covid recovery in the world's largest oil-consuming country. Perhaps the highlight among Friday's data points was the considerably higher than expected 3.1% y-o-y reading of the core PCE price index in April. The index smashed through the Fed's 2% inflation target amid the surge in pent-up demand as the US economy reopened. Nonetheless, the main US stock indexes closed marginally higher on Friday, as investors took the inflation data in stride, which may indicate that markets have come to accept the Fed's assertion that the rise in inflation is "transitory." Another indication that the US economy has remained firmly on the upswing, despite nearly 10 million Americans still being officially unemployed, was Friday's data on consumer spending (more than two thirds of US economic activity), which showed a 0.5% increase in April, while the data for March was revised higher to show that spending surged 4.7% instead of the previously reported 4.2%.This morning, Brent is hovering above $69/bbl following upbeat official May PMI data from China. Investors are focused on the OPEC+ supply policy meeting tomorrow and are on the lookout for any comments hinting at the prospects for the return of Iranian supply. We note that Russia's envoy to the talks on the nuclear deal, which are currently underway in Vienna, recently said in a tweet that there was an understanding among the countries involved that the current round of negotiations would be the final one. The OPEC+ ministerial meeting on Tuesday tops this week's agenda, perhaps along with the US nonfarm payrolls data on Friday. Investors will be looking for any insight into the next stage of the group's supply policy amid growing expectations that demand will accelerate through the end of the year. As for group policy in July, the market expects (as do we) that the alliance will ratify the planned supply hike of 0.84 mln bpd.We also expect OPEC+ to refrain from announcing any decision on output for August and beyond. Given the ongoing US-Iran talks, which could determine the timing of the long-anticipated return of Iranian oil exports, we expect OPEC+ to hold fire on any further production increases for at least a month, until there is more certainty. The group will likely continue to meet monthly to monitor market developments and respond to any emerging signs of overtightening or oversupply. We note that if a deal with Iran ends up being struck in the first half of June, the earliest we could see sanctions relief and an increase in Iranian production would be August. Even if things do play out this way, we think that OPEC+ would likely still consider increasing production in August, and perhaps in September as well, if it deems that demand is on track. We think the earliest such a decision could come is the early-July meeting. If the sides fail to reach an agreement by June 18, which is when elections will be held in Iran, we could see a strong oil price rally given the current widespread belief that a deal is imminent.Today, there are holidays in the US and UK, so we expect trading to be muted, with Brent likely to remain stuck below $70/bbl. However, Brent could begin to target the $70.4-71.0/bbl range, while on the downside there is a $68.8-69.20/bbl support LD CLIMBS ABOVE $1,900/OZ FOLLOWING US MACRO DATAGold ended Friday's trading at $1,905/oz, while the 10y US Treasury yield declined to 1.59% and EUR/USD hovered near 1.219. Friday's US macro data was mixed. The core PCE index came in at 0.7% m-o-m in April, slightly above the expected 0.6%. The y-o-y gauge was also above consensus at 3.1% versus an expected 2.9%. The acceleration in inflation boosted concern of possibly more imminent policy tightening, which created headwinds for bullion. Meanwhile, US wholesale inventories rose 0.8% in April, above the consensus estimate of 0.7% growth, and the University of Michigan consumer sentiment index printed at 82.9 in May, a touch above the expected 83. Both of these data points indicated an ease in the pace of the US economic recovery and thus supported gold prices. US personal income in April decreased by 13.1% versus an expected 14.2% drop, while personal spending rose by 0.5%, in line with the consensus. During the Asian session today, gold was still trading near $1,905/oz. This week, investors await May non-farm payrolls data from the US on Friday, which will be preceded by ADP's private payroll figures on Thursday. Also on tap from the US are constriction spending and durable goods orders for April, along with the usual weekly jobless claims figures. ISM and Markit will also publish May PMI readings for the US and a range of DMs. Today is Memorial Day in the US, where markets will be closed. The OECD will issue an updated economic outlook. Bullion is likely to trade in a $1,890-1,910/oz range