Commodities Daily - October 22, 2021

> Oil prices slide ahead of preliminary October PMIs. This morning, Brent slid below $84/bbl after US President Biden joined major crude oil importers by saying that Americans should expect high gasoline prices to continue into next year because OPEC is withholding supply. Today, investors will focus on DM preliminary October PMIs for manufacturing and services, which are most likely to be mixed, providing limited support for oil. We think Brent will end this week within the $83.30-83.80/bbl range.> Gold steady amid mixed macro data. Gold traded sideways near $1,780/oz yesterday, while the 10y US Treasury yield rose from 1.66% to 1.70%. Gold is trading near $1,785/oz as we write. Today, the market awaits preliminary October IHS Markit PMIs from the US and eurozone. We expect bullion to return to the $1,755-1,780/oz corridor today.> Base metals plunge as supply risks ease; Evergrande escapes default. Base metals dipped yesterday, as Chinese authorities' plans to tame coal prices and increase output dampened sentiment. With the market still tight, coal quotes might remain elevated until more physical coal hits the spot market. Meanwhile, Evergrande has escaped default for now.OIL PRICES SLIDE AHEAD OF PRELIMINARY OCTOBER PMISYesterday, after reaching a YTD high of $86.10/bbl, Brent began to slide toward $83.40/bbl amid new lockdowns in Eastern Europe and Russia due to rising coronavirus cases, which are threatening the economic recovery that has buoyed commodities and energy markets this year. Latvia became the EU's first member state to again shut down chunks of its economy, while neighboring Estonia said it may follow if the situation significantly worsens. Romania, where less than a third of its 19 million population is vaccinated, has turned to the WHO for help after deaths and new cases hit records. In Poland, authorities are monitoring rising cases and could decide by the end of the week on drastic measures. Later in the day, Brent managed to pare back some of the losses and eventually settled at $84.61/bbl, fixing $1.21/bbl below the previous settlement.Meanwhile, political pressure on OPEC+ to boost production seems to be building. The Japanese prime minister on Monday said that the recent increase in prices should encourage oil-producing countries to ramp up output, while mid-week at the India Energy Forum the Indian oil minister focused on the high crude prices, which he said were endangering economic growth as diesel demand in the country has already exceeded pre-pandemic levels and the high fuel prices are stoking inflation. At the forum, the Saudi energy minister responded by highlighting that any extra oil from OPEC+ would do little to tame the surging natural gas prices and that, amid the current energy crisis, "we see our role as extremely limited." This morning, Brent slid below $84/bbl after US President Biden joined major crude oil importers by saying that Americans should expect high gasoline prices to continue into next year because OPEC is withholding supply. He also said that "there are things we can do in the meantime" without elaborating, which in our view could mean a vast strategic petroleum reserve release. Still, despite the building political pressure, we think OPEC+ is unlikely to boost supply by more than the planned 0.4 mln bpd in December, though we see the risk that, when the group meets at the end of the year, the 2022 production plans could be revised higher. Today, investors will focus on DM preliminary October PMIs for manufacturing and services, which are most likely to be mixed, providing limited support for oil. We think Brent will end this week within the $83.30-83.80/bbl LD STEADY AMID MIXED MACRO DATAGold traded sideways near $1,780/oz yesterday, while the 10y US Treasury yield rose from 1.66% to 1.70%. EUR/USD slid from 1.165 to 1.162, creating headwinds for bullion. Yesterday's macro releases provided mixed signals. US weekly initial jobless claims again hit pandemic era lows (90k versus the 297k consensus). That points to a stronger US labor market recovery in October, thus possibly auguring a more hawkish Fed at the November meeting. Also, US existing home sales showed 7% growth in September, while the consensus had been for 3.7% growth. That also dampened negative sentiment for gold. Meanwhile, the Philadelphia Fed manufacturing business survey for October printed 23.8 (consensus: 25), after 30.7 in September. The US leading index for September rose 0.2% (a 0.4% increase was expected) after a 0.9% increase in August. Last but not least, the preliminary reading for October eurozone consumer confidence showed -4.8 points, slightly more optimistic than the -5 consensus. That provided tailwinds for bullion and helped prices to stay steady while the US 10y yield climbed further. Also, bullion found support from the uncertainty created by 10y breakeven inflation expectations having touched 2.64%, the highest reading since 2005 amid supply bottlenecks and elevated consumer demand. However, we don't expect this to support bullion for a long time. What we expect to be a hawkish Fed may push gold prices lower, as we saw in late May and early June. During Asian trading today, the gold price again rose to $1,785/oz. Today, the market awaits preliminary October IHS Markit PMIs from the US and eurozone. Expectations for the data are mixed: the eurozone is expected to show a decline to 57.1 points in manufacturing and 55.4 in services, while the consensus for the US is slightly more optimistic, with a decline to 60.5 in manufacturing but an increase to 55.2 in services. We also highlight that Fed Chairman Jerome Powell will be participating in a conference panel organized by South Africa's central bank. We expect bullion to return to the $1,755-1,780/oz corridor SE METALS PLUNGE AS SUPPLY RISKS EASE; EVERGRANDE ESCAPES DEFAULTYesterday, base metals closed in the red. Three-month LME contracts on copper plunged 3.89% (-$397/tonne from the previous day's close) to $9,789/tonne, aluminum declined 5.36% (-$165/tonne) to $2,905/tonne, nickel fell 4.98% (-$1,043/tonne) to $19,920/tonne and zinc dropped 4.00% (-$143/tonne) to $3,421/tonne.Base metals fell sharply yesterday following a plunge in coal prices to $300/tonne on the Zhengzhou Commodity Exchange, after Chinese authorities stepped in with certain measures to rein in coal prices earlier this week. Although the news has had a tangible impact on the market, there is a fundamental shortage of coal in China and India at the moment. Hence, we do not expect these interventions to have much of an impact on prices until the coal physically arrives to the spot market. That said, we expect a gradual slowdown in price growth, with quotes likely to remain somewhat elevated in the coming months.While the easing supply risks added pressure on metals yesterday, positive factors on the demand side are proving supportive today. China's Evergrande reportedly met its obligations before the closely watched October 23 deadline (when the 30-day grace period on a missed payment ended), according to Bloomberg. The payment buys some time for the developer to sell assets to cover its other obligations, increasing the probability of a restructuring rather than a default. Metals are reacting