Commodities Daily - September 20, 2021

> Oil ticks lower on stronger dollar, negative stock market momentum and ahead of Fed meeting this week. This morning, Brent is again sliding toward $74.6/bbl, as the global market risk-off from last week has carried over to today. There is little of significance on the macro calendar today. We think the current global market risk-off amid tapering jitters ahead of the Fed decision on Wednesday could gain enough momentum to pressure Brent to within the $74-74.5/bbl range later in the day today. > Gold holds steady despite rise in US 10y Treasury yield. Gold traded sideways around the $1,755/oz mark on Friday despite the 10y Treasury yield climbing from 1.33% to 1.36%. Data-wise, Friday brought a mixed bag. Gold is trading near $1,750/oz as we write. Today, the market awaits the US NAHB housing market index for September. We expect bullion to retest support at $1,745/oz today.> Metals lower amid risk-off sentiment, nickel global supplies under threat. Base metals continue to trade lower on Friday, as risk-off sentiment continues amid the upcoming Fed decision and China's efforts to rein in commodity markets. Global nickel supplies are jeopardized, as Indonesia is flirting with the idea of banning or taxing semi-processed nickel products.OIL TICKS LOWER ON STRONGER DOLLAR, NEGATIVE STOCK MARKET MOMENTUM AND AHEAD OF FED MEETING THIS WEEK.On Friday, Brent slid $1.2/bbl to as low as $74.6/bbl before rebounding to $75.5/bbl on news that Russia will increase its oil exports 3% in 4Q21, according to a newly released schedule of shipments. Exports are set to rise Q-o-Q through all Russian ports (Baltic, Black Sea and Far East) and also via pipeline to China (the ESPO link), while flows through the Druzhba pipeline are slated to be lower. Meanwhile, the Baker Hughes US active rig count rose by 10 units to 411, which points to a likely increase in US oil production toward year-end after the industry recovers from disruptions caused by the recent hurricanes. All in all, US crude oil production this year will remain roughly near 11 mln bpd, amid strong disruptions in February (Texas freeze-offs) and September. Output peaked at around 11.35 mln bpd in July and is expected to reach a similar level in December. The lack of US oil production growth this year has been a major contributor to the currently tightening supplies, with US crude inventories recently tumbling to their lowest level since 2019. Investors have also recently been tracking strong rallies in other energy commodities as well, especially natural gas, which has surged by about 45% so far in 3Q21 and spurred the prospect of fuel switching.In our view, however, the major oil price driver is currently the general risk-off sentiment in global markets, which has continued to drive stock markets lower and the dollar higher. This all comes ahead of the Fed meeting this week, at which hints at a move toward tapering are expected. Brent eventually settled at $75.34/bbl ($0.33/bbl below the previous settlement) on Friday and this morning is sliding back toward $74.6/bbl. The risk-off in global markets has carried through from last week. There is very little significant macro data scheduled for today. We think the current global market risk-off amid tapering jitters ahead of the Fed meeting could gain enough momentum to pressure Brent to within the $74-74.5/bbl range later today.The Fed's policy meeting on Tuesday and Wednesday will be watched by commodities investors not just for a tapering decision, but also for how Chairman Powell's views on price pressures and economic growth are evolving. The renewed surge for some commodity prices just as many major global economies struggle to carry through strong economic momentum for 1H21, is spurring talk of stagflation. We think that another set of upbeat US inventories on Wednesday will provide a boost to prices (although the upside this week will likely be capped at the $75.8/bbl mark). However, the Fed meeting later the same day could derail this momentum. The key price support this week is near $72.2/bbl (Brent's 50-day moving average), although we do not expect Brent to dip this low following Fed meeting this week - even under the negative scenario see it successfully defending the $73/bbl LD HOLDS STEADY DESPITE RISE IN US 10Y TREASURY YIELD Gold traded sideways near $1,755/oz on Friday despite the US 10y Treasury yield climbing from 1.33% to 1.36%. EUR/USD retreated from 1.176 to 1.173, creating a headwind for bullion. The final reading for the August Eurozone CPI came in line with expectations at 0.4% m-o-m and 3% y-o-y and failed to move gold. The US University of Michigan consumer sentiment index came in at 71 points for September, below the consensus of 72, though this marked an improvement from the August reading of 70.3, which was affected by the spread of the Delta strain. The improvement increased concerns over monetary policy tightening. Bullion was also pressured by market nerves ahead of this week's FOMC meeting, when the Fed will publish an updated economic outlook and dot plot incorporating the members' rate expectations, which could provide a signal for the tapering process.During today's Asian trading session, gold slid to $1,750/oz. The market is awaiting the US NAHB housing market index for September. The Fed's monetary policy decision will come on Wednesday. The US will also see building permits, housing starts, existing home sales, new home sales and the Chicago Fed national activity index (all for August), as well as the Kansas Fed manufacturing activity for September, preliminary Markit manufacturing and service PMIs for September and weekly initial jobless claims. In the eurozone, the consumer confidence index and preliminary Markit PMIs for September are due, as well as the economic bulletin report. We expect bullion to retest support at $1,745/oz TALS LOWER AMID RISK-OFF SENTIMENT, NICKEL GLOBAL SUPPLIES UNDER THREATBase metals mostly closed in the red on Friday. Three-month LME contracts on copper were down 0.71% (-$66 from the previous day's close) to settle at $9,264/tonne, aluminum edged down 0.62% (-$18) to $2,873/tonne, nickel remained flat at $19,390/tonne, while zinc dropped 0.21% (-$6) to settle at $3,068/tonne.Base metals continued moving lower in anticipation of the Fed meeting on Wednesday, at which rhetoric about an easing of stimulus is highly expected. The market will be looking out for hints a move toward scaling back the monthly asset purchases will be made this year. Meanwhile, Chinese authorities' strong intentions to keep on with interventions in commodity markets have been reinforcing the risk-off sentiment.On Friday, nickel managed to remain flat d-o-d despite the general negative trend in other base metals. The three-month nickel contract on the LME even managed to reach $20,250/tonne intraday. The rally was caused by news from Indonesia about a potential ban on exports of semi-processed nickel products, as the country tries to support its domestic EV battery industry. Indonesia's ban on exports of raw nickel in 2014 spurred the rally that is still running. With stainless steel production limited to a certain level of capacity, we believe that the reason for such plans is not a deficit of nickel, but rather an attempt to attract additional investments to the production of what is a vital component for batteries and also position the country as the leading supplier to the largest EV producers. Regardless of whether this is the case or not, a sharp departure of circa 30% of refined nickel production from global trade might be painful for the