Commodities Daily - September 27, 2021

> Oil prices rise ahead of a busy week. On Friday, Brent rallied almost $1.4/bbl to as high as $78.24/bbl at one point. Investor attention remains on the continuing drop in global crude oil and refined product stockpiles. Bloomberg has reported that global onshore crude oil supplies alone sank by almost 21 mln bbl last week, led by China. Today, the highlight on the macro calendar is US August durable goods orders. In our view, Brent's positive momentum from last week is likely to carry through into today's session, helping the benchmark make a push toward $80/bbl. We expect a further push toward $82/bbl later in the week amid the still strong market fundamentals.> Gold holds steady despite rise in US Treasury yields. Gold traded sideways around the $1,750/oz mark on Friday, while the US 10y Treasury yield edged up from 1.43% to 1.45%. Bullion is trading near $1,760/oz as we write. Today, the market awaits US durable goods orders for August and the Dallas Fed manufacturing index for September. We expect bullion to remain range-bound at $1,750-1,775/oz today.> Metals mixed, Chinese manufacturing data in focus this week. Base metals traded mixed on Friday, with focus on the Chinese economy. Curbs on emissions and electricity usage are in full swing with no ease expected, as we are getting closer to the end of the year and the Winter Olympics. This week will be replete with Chinese manufacturing data and likely higher volatility ahead of the National Day holiday in the country.OIL PRICES RISE AHEAD OF A BUSY WEEKOn Friday, Brent rallied almost $1.4/bbl to as high as $78.24/bbl before eventually settling at $78.09/bbl, $0.84/bbl above the previous settlement. This was the benchmark's highest close in nearly three years, for the second day in a row. Investor attention remains on the continuing drop in global crude oil and refined product stockpiles. Bloomberg, citing analytics firm Kayrros, reported that global onshore crude oil supplies alone sank by almost 21 mln bbl last week, led by China, while US crude oil inventories are near a three-year low. The surge in natural gas prices is expected to force some consumers to switch to oil (in our view, this will provide a 0.5 mln bpd boost to oil demand this winter), further tightening the market ahead of winter in the northern hemisphere. The spread between December 2021 and December 2022 Brent futures is already near $7/bbl (versus about $3/bbl in mid-August), the widest since 2019.The looming global energy crunch is likely to dominate the agenda in the commodities market over the coming days and weeks, as the onset of winter threatens to compound the pressure coming from the supply side and could therefore fuel consumer price growth and challenge governments across the globe. The tight conditions in the gas market are unlikely to ease before November, when Russia finishes filling up its depleted storage. Meanwhile, in the US, futures for natural gas are trading near the seven-year high reached earlier this month, with inventories still tight ahead of the winter, and also thanks to strong export demand. There have also been power issues in Asia, where China is grappling with a spike in coal prices, even before the seasonal pickup in demand. This has exacerbated the pressure on downstream industries that are already being hammered by curbs on power consumption.Given this backdrop, investors will be waiting for OPEC+ to provide reassurance that it will be ready to prevent prices from overheating when it meets on October 4. Key members have already signaled that the group will probably approve a further restart of oil supplies halted during the pandemic. On Tuesday, OPEC will unveil its annual long-term outlook, which will contain projections for oil supply and demand in the decades ahead. If last year's report is any guide, this year's outlook will probably show that the group expects to remain a powerful force in the market for some time to come. As for today, the highlight on the macro calendar is US August durable goods orders. In our view, Brent's positive momentum from last week is likely to carry through into today's session, helping the benchmark make a push toward $80/bbl. Later in the week, investors will pay even more attention than usual to the weekly inventory updates, as well as the monthly EIA 914 report on US crude oil production (with the actual numbers for July). September PMI data is also due out of China, the US and the eurozone. We believe the fundamental strength of the market is likely to keep pushing oil prices higher this week, with Brent rallying toward $82/ LD HOLDS STEADY DESPITE RISE IN US TREASURY YIELDSGold traded around the $1,750/oz mark on Friday, while the US 10y Treasury yield edged up from 1.43% to 1.45%, its highest level since mid-July. EUR/USD eased from 1.174 to 1.172, creating a headwind for gold. US new home sales for August rose 1.5%, above the consensus expectation of 1.0% growth. This created positive sentiment around the US real estate market and provided support for investors expecting monetary policy tightening sooner rather than later. Support for bullion remains as markets continue to monitor the possible collapse of Chinese developer Evergrande Group. China's housing regulator has increased supervision of company's bank accounts to protect funds intended for housing projects from being diverted to creditors.Gold has firmed to $1,760/oz this morning. Today, the market awaits US durable goods orders for August and the Dallas Fed manufacturing index for September. This week Fed Chair Jerome Powell is due to give testimony in the US Congress on Tuesday and Thursday and a speech on Wednesday, while US PCE inflation for August is due on Friday. The US will also see the Markit and ISM manufacturing PMIs for September, wholesale inventories for August, pending home sales for August, consumer confidence for September, the housing price index for July, personal income and spending for August and weekly initial jobless claims. In the eurozone, ECB President Christine Lagarde is due to give speeches on Tuesday and Wednesday, while the Markit manufacturing PMI for September, industrial confidence for September, preliminary CPI for September and unemployment for August are all due. We expect bullion to remain range-bound at $1,750-1,775/oz TALS MIXED, CHINESE MANUFACTURING DATA IN FOCUS THIS WEEKBase metals closed with mixed performances on Friday. Three-month LME contracts on copper were up 0.78% (+$72 from the previous day's close) to $9,357/tonne, aluminum edged down 1.04% (-$31) to settle at $2,926/tonne, nickel was down 1.08% (-$210) $19,215/tonne, while zinc added 0.68% (+$20) to settle at $3,112/tonne.Investors remained concerned about the Chinese property sector and what implications the turmoil could have for metals. Another point of attention remains China's curbs on electricity usage and emissions cuts. Many provinces are forcing factories in manufacturing hubs to cut or even halt operations. With China usually consistent with its goals (in this case, to become net-zero by 2060) and in light of the country's intention to ensure blue skies ahead of the Winter Olympics, we do not expect production to return to full capacity anytime soon. With several steel mills completely shut down in some provinces, we consider the current iron ore restocking temporary ahead of National Day holiday in China (starting October 1). As mills lower their production targets in order to be in line with government mandates, less demand for iron ore is anticipated. We stick to our view of iron ore prices falling to $80-90/tonne toward 2022.This week, investors will pay close attention to Chinese manufacturing data. Industrial profit for August and PMI figures for September will show how manufacturers have managed amid the government pressure. The manufacturing PMI has been falling for five months in a row and we do not expect a reversal, given the even more intense curbs in recent months. For commodity investors, lower numbers would be proof of further downside potential for metals. Meanwhile, we expect volatility to pick up somewhat later in the week ahead of the National Day in