Commodities Daily - November 16, 2021

> Oil continues to trade sideways ahead of the monthly IEA oil market report. This morning, Brent rallied toward $83/bbl before easing back to $82.6/bbl. Today, investors are eyeing the monthly IEA oil market report, US October retail sales and industrial production data, as well as the weekly API update on US oil and refined product inventories (due overnight). We think Brent could push toward $84/bbl today on what should be strong US retail sales and also if the IEA report belies the OPEC view of a strongly oversupplied market early next year.> Gold consolidates ahead of US retail sales data. Gold remained near $1,860/oz yesterday, while the US 10y Treasury yield climbed from 1.56% to 1.61%. Gold is trading near $1,865/oz as we write. Today, the market awaits US retail sales and industrial production for October and eurozone GDP for 3Q21. We expect bullion to trade in a $1,830-1,860/oz range today.> Base metal prices fall on weak Chinese property market data; US-China negotiations in focus. Base metals traded lower yesterday as investors weighed weak data on the Chinese property market, which is widely considered the main threat to the nation's economic growth. Meanwhile, a positive outcome to the ongoing negotiations between the US and China would likely boost demand for metals.OIL CONTINUES TO TRADE SIDEWAYS AHEAD OF THE MONTHLY IEA OIL MARKET REPORTDuring first half of the day yesterday, Brent slid $1.8/bbl to $80.7/bbl before rebounding to $82/bbl. It eventually settled at $82.05/bbl, fixing $0.12/bbl below the previous settlement. In its monthly drilling productivity report, the EIA forecast that US shale output would climb 0.085 mln bpd in December to 8.316 mln bpd, which is the strongest m-o-m growth projection this year. In October, growth for November was projected to be 0.077 mln bpd and in September growth of just 0.066 mln bpd was expected in November. The most recent actual figure is for August (11.14 mln bpd), while the latest weekly data points to 11.50 mln bpd. For 2022, we think total US crude output will average 12.2 mln bpd and expect the figure for 2023 to increase by 0.6 mln bpd to an average of 12.8 mln bpd. The pre-coronavirus US record production level of almost 13 mln bpd is a realistic production target for 2023. This morning, Brent rallied toward $83/bbl before easing back to $82.6/bbl. Today, investors are eyeing the monthly IEA oil market report, US October retail sales and industrial production data, as well as the weekly API update on US oil and refined product inventories (due overnight). Today, we think Brent could push toward $84/bbl on what should be strong US retail sales and also if the IEA report belies the OPEC view of a strongly oversupplied market early next year. OPEC's oil market forecast - which the OPEC+ oil ministers use for decisions about production quotas - points to a massive surplus early next year. This is being used as justification for sticking to the plan of only modest production increases. Regarding today's October US retail sales data, we highlight that a good start to 4Q21 will bolster hopes that consumer spending has accelerated after a lackluster 3Q21. The main risk is high prices and shortages, which are showing sign of dampening consumer sentiment and real spending power. Meanwhile, we think US industrial production data may have struggled to regain in October what was lost in the hurricane-impacted month of September, while oil- and gas-related activities are likely to have rebounded and we expect a mixed performance across manufacturing categories. Over time, however, inventory replenishment is likely to support economic activity even after stimulus-fueled demand for consumer goods LD CONSOLIDATES AHEAD OF US RETAIL SALES DATAGold remained near $1,860/oz yesterday, while the US 10y Treasury yield climbed from 1.56% to 1.61% and EUR/USD slid from 1.145 to 1.137. Inflation remains elevated, and investors are looking for clues as to whether it is affecting the economic recovery, and gold's sideways trend in recent days is a reflection of that. Recent data has shown a decline in consumer sentiment but a strong labor market, and yesterday the Empire State manufacturing index for November was positive, coming in at 30.9, above the consensus of 22. Central banks remain dovish about monetary policy, which is providing support for bullion. Minneapolis Fed President Neel Kashkari said an overreaction to rising prices by the Fed could lead to a worse long-term outlook for the US economy. ECB President Christine Lagarde said something similar about the eurozone economy, stating that it could be negatively affected should the regulator decide to tighten its policy now. However, some former Fed officials are more hawkish and are suggesting that the Fed could lift interest rates to 3-4% to curb inflation. Gold has nudged up to $1,865/oz as we write. Today, the market awaits US retail sales and industrial production for October and eurozone GDP for 3Q21. The figures could cast some light on how inflation is impacting the US and eurozone economies. The consensus estimates suggest that both indicators improved in October and that the recovery process should have remained strong. We expect bullion to trade in a $1,830-1,860/oz range SE METAL PRICES FALL ON WEAK CHINESE DATA; US-CHINA NEGOTIATIONS IN FOCUSYesterday, base metals closed in the red. Three-month LME contracts on copper fell 0.39% (-$38/tonne from the previous day's close) to $9,673/tonne, aluminum declined 1.59% (-$43/tonne) to $2,657/tonne, nickel dropped 1.93% (-$385/tonne) to $19,594/tonne and zinc slid 1.55% (-$51/tonne) to $3,217/tonne.Aluminum led the losses across the board yesterday amid weak data on the Chinese property market. An index of new home prices in 70 cities slumped further in October, highlighting that the crisis in the Chinese housing market remains the key risk to demand for metals. It seems that the goal of the Chinese authorities to reduce the overall economy's dependence on the property sector will end up costing a lot, as the PBoC has been sticking to its deleveraging stance and has clearly been reluctant to provide financing for the real estate sector. Still, some better than expected data from China yesterday (on industrial production and retail sales) provided some relief for metals markets, as it suggested that the economy may not be set to deteriorate further, although there are still no signs of a turnaround.Today, metals are trending higher as we write, with investors focused on the negotiations between the US and Chinese presidents, which could lead to an ease in tensions between the two nations. Tariffs, sanctions and human rights are among the main topics of discussion. The potential lifting of restrictions on Chinese exports to the US would likely boost demand for metals. Commodity markets seem to be pretty positive on the meeting, as even prices on the long-suffering iron ore are on the rise. Meanwhile, there is a good chance that China will impose fresh cuts on steel output in the near future, as it often does in mid-November to reduce smog during the winter heating season. If China does introduce further cuts, iron ore would respond