Commodities Daily - September 6, 2021

> Oil prices under pressure as Saudi Arabia slashes prices to Asia. This morning, Brent dipped below $72/bbl as Saudi Arabia slashed crude prices for Asian buyers, raising the prospect of fierce competition among sellers as the resurgence of Covid-19 continues to cloud the demand outlook in the region. Trading will likely be thin in the UK and US today due to the Labor Day holiday in the US. We think Brent will continue to trade sideways today, staying above its 100-day moving average (currently $71.2/bbl) and is unlikely to rise above its 50-day moving average of $72.5/bbl.> Gold rallies after disappointing US labor data. Gold jumped from $1,810/oz to $1,830/oz on Friday, despite the 10y US Treasury yield rising from 1.29% to 1.32%. US nonfarm payrolls came in at 235k in August, well below the 725k consensus. Gold is trading near $1,830/oz as we write. Today is Labor Day in the US, and the US market is closed. We expect bullion to remain range-bound at $1,815-1,830/oz today.> Metals supported by weaker greenback; Chinese data in focus this week. Base metals edged higher on Friday amid the weak US August jobs report, as investor expectations for a less dovish Fed in September faded. Nickel, recently driven by solid demand and low inventories, could now cool off if inventories and Chinese imports reverse their recent trends. OIL PRICES UNDER PRESSURE AS SAUDI ARABIA SLASHES PRICES TO ASIAOn Friday, after rising $0.8/bbl toward $73.8/bbl, front-month Brent slid to $72.5/bbl as investors digested the disappointing US payroll growth and faster than projected wage increases. This complicates a potential decision by the Fed to begin scaling back stimulus. Separately, traders continued to watch for the return of US oil production and US refineries affected by Hurricane Ida. Note that a second refiner in Louisiana access to the country's emergency crude stockpiles as most oil-producing platforms in the Gulf of Mexico remain offline. Brent on Friday eventually settled at $72.61/bbl, fixing $0.42/bbl below the previous settlement.This morning, Brent dipped below $72/bbl as Saudi Arabia slashed crude prices for Asian buyers, raising the prospect of fierce competition among sellers as the resurgence of Covid-19 continues to cloud the demand outlook in the region. It is important to highlight that last month some Asian customers requested less crude from Saudi Arabia due to the demand impact from the Delta strain of Covid-19. Meanwhile, Saudi official prices for cargo sales to the US, Northwest Europe and the Mediterranean were stable or little changed, pointing to the producer's intent on prioritizing oil flows to Asia. Today's trading will be limited on ICE and NYMEX exchanges due to the Labor Day holiday in the US. We think Brent will continue trading sideways today, staying above its 100-day moving average, which today is at $71.2/bbl and is unlikely to rise above $72.5/bbl where its 50-day moving average is.This week apart from the weekly US inventory update (which will be delayed by one day due to today's holiday and promises to be dramatic, as it will for the first time show the market impact of Hurricane Ida) investors will also eye China trade data on Tuesday that will provide clues on its economic recovery and the EIA's monthly oil market report on Thursday. The EIA will most likely make downbeat demand revisions for 2021 and 2022, as the Delta variant continues to impact oil consumption in many parts of the world. This week investors will also turn their attention to the ECB, which on Thursday will decide if it should dial back economic stimulus. US PPI data for August is due on Friday. The bumpy progress of President Joe Biden's $3.5 trln tax and spending package is in focus too. Also, Biden will likely make his choice this week on whether to renominate Fed Chairman Jerome Powell to a second term. In our view, this week is likely to be similar to the last one price-wise, with a negative trend early in the week to give way to positive momentum later on. The recent recovery in prices and calendar spreads was partly justified, as the recent selloff was overdone: Hurricane Ida boosted refining margins, China returned to normalcy after quickly bringing its latest Covid-19 outbreak under control and as the full approval of the Pfizer vaccine by the US FDA should raise US vaccination rates. In our view, Brent is most likely to rebound above $72.5/bbl later this week, with $73.7/bbl remaining the key resistance that it failed to break on two occasions LD RALLIES AFTER DISAPPOINTING US LABOR DATAGold jumped from $1,810/oz to $1,830/oz on Friday, while EUR/USD held steady near 1.187. However, the 10y US Treasury yield rose from 1.29% to 1.32%, creating a headwind for bullion. The market was focused on the US labor market data for August. Nonfarm payrolls totaled 235k, well below the 733k consensus and the revised figure of 1.053 mln for July. The weak number was attributable to the Delta strain, which has halted the employment recovery in the hotel and recreation sector. Bullion climbed to a near seven-week high as the jobs data created hopes that the Fed could wait longer to taper. US President Joe Biden said the US economy remains strong despite the weak labor market data in August. However, wages grew 0.6% in August and the unemployment rate fell from 5.4% to 5.2%, which caused a pickup in inflation expectations and Treasury yields and curbed gold's upside momentum. Meanwhile, the ISM services index for August was virtually in line with the consensus at 55.2.Gold is trading near $1,830/oz as we write. Today, market activity will be limited due to the Labor Day holiday in the US. The calendar contains no significant data. Later this week, the US PPI for August is due on Friday and the ECB's monetary policy decision comes on Thursday. The US will also see the Fed's beige book, JOLTS job openings for July, wholesale inventories for July and weekly initial jobless claims. The eurozone will see the final GDP reading for 2Q21 and ZEW survey expectations for September. We expect bullion to remain range-bound at $1,815-1,830/oz TALS SUPPORTED BY WEAKER GREENBACK; CHINESE DATA IN FOCUS THIS WEEKBase metals closed with gains on Friday, though they were relatively modest. The 3m LME contract on copper gained 0.69% to $9,468/tonne (up $65/tonne from the Thursday close), that on aluminum edged up 1.22% to $2,717/tonne (up $33/tonne), nickel rose 2.22% to $19,885/tonne (up $432/tonne) and zinc added 0.36% to $3,002/tonne (up $11/tonne).On the macro front, the US August jobs report on Friday fell far below expectations and the market view that the Fed will start tapering in September weakened. Meanwhile, dovish comments by Chairman Jerome Powell pushed the dollar lower, providing support to dollar-denominated metals. Friday's outperformer was nickel, supported as well by a tight market amid a combination of strong demand from industrial sectors and low inventories (though they are currently on the rise). The risk for nickel now is further growth in stocks and higher Chinese imports. In today's early morning trading, nickel on the LME is consolidating after touching its recent high from end-July of $19,890/tonne. Having failed to break through the psychologically important level of $20,000/tonne, prices are likely to pull back to $19,400/tonne this week.This week, investors will be watching out for Chinese economic data. August imports and exports, as well as inflation data (CPI and PPI), might provide a clue on what the government will do now with stimulus - there have been suggestions that further stimulus is coming, as the economic rebound has slowed. Additional stimulus would be positive for