Commodities Daily - November 10, 2021

> Oil prices rise following EIA monthly report and ahead of the EIA weekly inventory data. This morning, Brent is trading just above $85/bbl following an upbeat API inventory report last night, which showed crude oil and refined product inventory draws. Today, investors will focus on the weekly EIA inventory report and the US October CPI data. We think the EIA data will most likely be upbeat, in line with the API data, and push Brent toward $86/bbl later in the day. > Gold gains ground following elevated US PPI reading. Gold rose from $1,825/oz to $1,830/oz yesterday while the US 10y Treasury yield slid from 1.49% to 1.44%. Gold is trading near $1,825/oz as we write. Today, the market awaits US CPI inflation for October and weekly initial jobless claims. We expect bullion to trade in a $1,805-1,830/oz range today.> Base metal prices move lower with inflation data in focus. Prices on most base metals moved lower yesterday, with aluminum leading the move downward. Metals were responding to another elevated PPI reading from the US yesterday, as higher producer prices affect manufacturers, weakening demand for raw materials. China published its latest batch of inflation data earlier this morning, while the October CPI report is due from the US later today, so we could be in for a volatile session.OIL PRICES RISE FOLLOWING EIA MONTHLY REPORT AND AHEAD OF THE EIA WEEKLY INVENTORY DATAYesterday, Brent gained $1.8/bbl, rising toward the $85/bbl mark. The move was fueled by the monthly EIA report, which predicted that the market will be oversupplied early next year, but also that prices will fall from the current levels in December. All eyes were on the EIA publication, as many market players expected the US to release volumes from its Strategic Petroleum Reserve following recent comments from Biden administration officials. The EIA raised its forecasts for US retail gasoline prices for November and December by just $0.16/gallon and $0.11/gallon, respectively, providing little justification for a release. The EIA now expects global oil inventories to build by 0.1 mln bpd in 1Q22, whereas it expected them to decline by 0.1 mln bpd last month. The agency also raised its stock build forecast for the rest of 2022 (and reduced its forecast for the stock draw in 4Q21) in light of higher expected non-OPEC supply and lower global demand. The EIA now expects Brent to decline from its current levels to an average of $72/bbl for next year.The White House welcomed the EIA's forecasts showing that oil prices are set to moderate and said that it would not announce a release from the Strategic Petroleum Reserve yesterday. Nonetheless, the Biden administration remains concerned about energy prices during the cold winter months, and a White House official said that the administration continues to engage with OPEC and its partners, encouraging them to further boost supply. This morning, Brent is trading just above $85/bbl following an upbeat API inventory report last night, which showed draws in stockpiles of both crude oil (2.5 mln bbl) and refined products (4.5 mln bbl for gasoline and 3.3 mln bbl for distillates). Today, investors will focus on the weekly EIA inventory report and the US October CPI data. We think the EIA data will most likely be upbeat, in line with the API data, and push Brent toward $86/bbl later in the LD GAINS GROUND FOLLOWING ELEVATED US PPI READING Gold rose from $1,825/oz to a two-month high of $1,830/oz, while the US 10y Treasury yield slipped from 1.49% to 1.44%. EUR/USD held near 1.159, limiting bullion. Gold was propelled by US producer inflation staying higher for longer than expected, while major central banks, especially the Fed, have turned more dovish. The US PPI for October climbed to 0.6% m-o-m and a hefty 8.6% y-o-y, in line with expectations. Inflation risks are also growing in China, where consumer prices rose 1.5% y-o-y, the highest reading in more than a year, while factory gate prices grew 13.5%, their fastest pace in 26 years. Rising inflation could prompt regulators to start withdrawing economic stimulus measures and create fundamental pressure for gold. US Treasury Secretary Janet Yellen repeated her view that elevated inflation figures in the US will not persist beyond next year and said that the Fed will act if needed to prevent uncontrolled, 1970s-style inflation. San Francisco Fed President Mary Daly also gave off dovish signals, indicating that supply-chain issues should ease as the pandemic weakens and more clarity should come next summer once the regulator ends QE tapering.Gold is trading near $1,825/oz as we write. Today, the market awaits US CPI inflation for October and weekly initial jobless claims. The consensus expects a US consumer inflation reading of 5.9% y-o-y and 260k new claims last week. A high inflation number could create concerns that the Fed will turn hawkish more quickly than expected, but giving the weak rhetoric at the last FOMC meeting, we think gold would find support from a rise in inflation expectations. We expect bullion to trade in a $1,805-1,830/oz range SE METAL PRICES MOVE LOWER WITH INFLATION DATA IN FOCUSYesterday, base metals closed in the red, with zinc an exception. Three-month LME contracts on copper fell 0.88% (-$85/tonne from the previous day's close) to $9,553/tonne, aluminum slid 1.86% (-$48/tonne) to $2,557/tonne and nickel dropped 1.22% (-$239/tonne) to $19,401/tonne, while zinc edged up 0.32% (+$11/tonne) to $3,282/tonne.Metals slipped yesterday after the October PPI report from the US showed that there is still significant upward pressure on producer prices. Although the headline m-o-m reading was in line with expectations, it was still up from the September level, indicating that the material shortages, transportation bottlenecks and higher labor costs have been affecting manufacturers. This was a bearish sign for metals prices, as it points to weakening demand for raw materials. The elevated inflation reading also fueled worries about the timing of the Fed's tightening, which further weighed on metals prices. Aluminum led the move downward, pressured by the ease in China's power crisis, as less constrained access to electricity might lead to an increase in the supply of the energy-intensive metal.Today, volatility may be elevated, as China posted record PPI and CPI readings earlier this morning and investors will closely eye the US CPI release due this afternoon. The Chinese PPI and CPI readings for October were both above expectations at 13.5% and 1.5% y-o-y, respectively. Hence, it looks like producer price inflation in China is starting to be passed on to consumers, which, given the hawkish stance of the Fed and other global central banks, limits the PBoC's room for easing. With little support likely to arrive for China's already slowing economy, demand for metals is likely to