Commodities Daily - September 14, 2021

> Oil rises on upbeat OPEC report and as another hurricane menaces Texas. Today, investors will eye the IEA monthly oil market report and US August CPI data, with both releases holding potential downside risks for oil prices in our view. On the other hand, hurricane-related further supply stresses and what should be upbeat API data on US crude oil and refined product inventories (due overnight) are most likely to be a strong enough factor to drive Brent toward $75/bbl later today.> Gold holds steady ahead of US inflation reading. Gold traded sideways around the $1,790/oz mark yesterday while EUR/USD also held steady near 1.181. Gold is trading near $1,795/oz as we write. Today, the market awaits US CPI data for August and the NFIB small business optimism index for August. We expect bullion to retest support at $1,790/oz today.> Metals lower in anticipation of US inflation data, aluminum seeing profit-taking. Base metals traded in the red yesterday, as investors await the US inflation report for hints on how fast the Fed will embark on tapering. Aluminum has seen profit-taking after hitting the important psychological level of $3,000/tonne, whereas iron ore has extended losses ahead of Chinese industrial output data due for release tomorrow.OIL RISES ON UPBEAT OPEC REPORT AND AS ANOTHER HURRICANE MENACES TEXASYesterday, front-month Brent gained $1.2/bbl and rallied toward $73.9/bbl, with the monthly OPEC market report release being one of the price-supportive factors. OPEC now forecasts stronger demand for its own crude for this year and next on a combination of rising global fuel consumption and output disruptions elsewhere. Despite the threat of the Delta variant of Covid-19, the oil demand forecast was revised higher by 0.11 mln bpd this year and by 0.97 mln bpd for next year. Meanwhile, crude oil production in the North Sea, US (curbed by Hurricane Ida) and Mexico is now seen as coming in lower than what was anticipated in the previous report. The demand estimate for OPEC's own crude oil was revised higher by a strong 1.12 mln bpd for 2022. Separately, the EIA's monthly drilling productivity report sees more gains in shale oil production from the US, expecting output to add 0.066 mln bpd in October to reach 8.135 mln bpd, although this is far behind the pre-pandemic highs.Another factor supporting oil prices is tropical storm Nicholas, which has now reached hurricane strength ahead of landfall (it is expected to make landfall along the Texas coast in a few hours). Heavy rains and possible flooding are expected in Houston and parts of Louisiana, areas still recovering from Hurricane Ida two weeks ago. About 44% of oil supply is still down in the Gulf and now more output could be at risk. Shell has already began removing some staff from one of its platforms to prepare for the storm, while refineries in Texas could also see some curtailments, given the storm's coastal track. There's also been extreme weather in Asia: all operations at China's Zhoushan and Ningbo ports remained shut as of this morning in the wake of Typhoon Chanthu. These ports are home to major refineries and oil-storage facilities. Yesterday, Brent eventually settled at $73.51/bbl, $0.59/bbl above the previous settlement.Today, investors will eye the IEA monthly oil market report and US August CPI print. We see both releases as bearing downside risks for oil prices. The IEA may not follow in OPEC's footsteps in revising its previous global oil demand estimates higher while what could well be a high CPI print would be seen as pushing the Fed toward a sooner tapering of asset purchases, which is negative for risk assets. However, hurricane-related further supply stresses (more crude oil and refined product supply may soon go offline) and what should be upbeat API data on US crude oil and refined product inventories (due overnight) are likely strong enough factors to drive Brent toward $75/bbl later LD HOLDS STEADY AHEAD OF US INFLATION READINGGold traded around the $1,790/oz mark yesterday while EUR/USD remained near 1.181. The 10y US Treasury yield slid from 1.34% to 1.32%. The macro calendar was virtually empty, which helped gold to consolidate ahead of today's US CPI data. However, the New York Fed yesterday published its latest inflation expectations report, which was collated in August. Americans anticipate record high inflation over the next few years, including 5.2% in 12 months' time, a figure that has edged up 0.3% since the last survey in July. Three-year forward inflation expectations have also increased by 0.3% to 4%. Food prices are expected to climb by 7.9% per year and rent costs by 10% per year. Meanwhile, median incomes are expect to be 3% higher in a year's time, so households are expecting inflation to outpace wages. Inflation is largely being driven by supply disruptions tied to the reopening f the US economy. A chorus of Fed officials have repeatedly flagged that the biggest gains in inflation have happened in parts of the economy most affected by the coronavirus.Gold is trading near 1,795/oz as we write. Today, the market awaits the US CPI data for August and the NFIB small business optimism index for August. The consensus for US inflation stands at 0.4% m-o-m and 5.3% y-o-y, which would represent slowing inflationary pressure. However, giving the higher than expected producer price inflation in August, rising wages and the rise in consumer inflation expectations, the CPI could come in above consensus. We expect bullion to retest support at $1,790/oz TALS LOWER IN ANTICIPATION OF US INFLATION DATA, ALUMINUM LIKELY PRIME FOR PROFIT-TAKINGBase metals closed in the red yesterday. Three-month LME contracts on copper were down 1.58% (-$154 from the previous day's close) to settle at $9,534/tonne. Aluminum edged down 1.15% (-$33) to $2,892/tonne, nickel dropped 3.38% (-$690) to $19,720/tonne, while zinc was 1.12% (-$35) lower to settle at $3,077/tonne.The decline came as markets await today's US inflation data print, which may affect how fast the Fed embarks on tapering its bond-buying program. Aluminum reversed after touching $3,000/tonne in London for the first time since 2008, suggesting that investors are probably taking profits. The metal has seen a circa 50% price increase so far this year following the rebound in economic activity, while Chinese curbs on electricity consumption and emissions control are putting a lid on production.Meanwhile, iron ore dropped below $130/tonne and is trading near its lowest level this year. The plunge so far stands at 43% from the peak of $224/tonne seen in mid-May. The downturn is attributable to slower industrial production in China and healthy supply-side numbers. Volumes of Chinese iron ore inventory held in ports are currently 9% higher than in 2020 and 4% above the five-year average, with stockpiles expected to rise further for the rest of the year. Chinese industrial production data (due tomorrow) will show how Beijing is faring with its goal of decreasing steel output and cutting CO2