Commodities Daily - September 9, 2021

> Oil advances amid mixed monthly EIA report; EIA weekly inventory data eyed. Brent is hovering below $73//bbl as we write in the wake of an upbeat API inventory report that indicated a decline in US crude oil, gasoline and distillate stockpiles. Oil investors are primarily eyeing the outcome to the ECB meeting today and the weekly EIA inventory report, which has been delayed by a day due to the US public holiday on Monday. We expect the weekly EIA data to be upbeat and anticipate some hawkish comments from the ECB (which would weaken the dollar), so we see Brent finding support all the way up to the $73.7/bbl mark that it failed to break on couple of occasions recently. Support is now at the 50-day MA of $72.3/bbl.> Gold remains under pressure from tapering uncertainty. Gold retreated from $1,795/oz to $1,790/oz yesterday, while EUR/USD eased from 1.184 to 1.181. Macroeconomic data brought headwinds for bullion. It is still trading near $1,790/oz as we write. Today, the market will be monitoring the ECB monetary policy meeting and US weekly initial jobless claims. We expect gold to remain range-bound at $1,775-1,790/oz today.> Base metals mostly in the green, Chinese inflation data in focus. Base metals mostly traded higher yesterday, with copper an exception. This morning, China published an unexpectedly high PPI reading for the month of August, which puts the government at a crossroads when it comes to choosing between environmental goals and economic growth. Meanwhile, thermal coal prices in China climbed to new record highs.OIL ADVANCES AMID MIXED MONTHLY EIA REPORT; EIA WEEKLY INVENTORY DATA EYEDBrent gained $1.4/bbl yesterday to reach $73/bbl amid a slow resumption of the US production that was halted by Hurricane Ida more than a week ago, with just over 20% of US Gulf of Mexico oil and natural gas production back online after the hurricane battered southeast Louisiana, marking an even slower comeback than in the wake of Katrina. The market also digested a mixed EIA monthly oil market report yesterday. The EIA cut its global demand forecast by an average of 0.5 mln bpd in 3Q21 due to the Delta variant in Asia, although it lifted its US demand estimate despite the spread of Delta in the country. It lowered its demand estimate for this year by 0.24 mln bpd (to an average of 97.38 mln bpd) and by the same 0.24 mln bpd for 2022 (for an average of 101.01 mln bpd). For next year, the EIA is rather bullish on demand growth in the US, as well as in south and southeast Asia. On the upside, however, the EIA lowered its 2021 non-OPEC production growth forecast by almost 0.2 mln bpd to just 0.9 mln bpd y-o-y), led by decreases to its forecasts for Russia, the US (likely because of Hurricane Ida) and Asia. The EIA slightly lowered its non-OPEC supply growth forecast for 2022 as well, though we think it remains too optimistic, particularly for Latin America and Russia. The agency also cut its 2022 US crude output forecast to an average of 11.72 mln bpd from 11.77 mln bpd projected in August. The mixed report and the release of a slightly downbeat Fed beige book (which noted that the US economy "downshifted slightly" in August as the coronavirus surge hit dining, travel and tourism) failed to derail Brent's rally, and it eventually settled at $72.6/bbl, up $0.91/bbl on the day.Brent is hovering below $73//bbl as we write in the wake of an upbeat API inventory report that indicated a decline in US crude oil (-2.88 mln bbl), gasoline (-6.41 mln bbl) and distillate (-3.75 mln bbl) stockpiles. Oil investors are primarily eyeing the outcome to the ECB meeting today and the weekly EIA inventory report, which has been delayed by a day due to the US public holiday on Monday. We expect the weekly EIA data to be upbeat and anticipate some hawkish comments from the ECB (which would weaken the dollar), so we see Brent finding support all the way up to the $73.7/bbl mark that it failed to break on couple of occasions recently. Support is now at the 50-day MA of $72.3/ LD REMAINS UNDER PRESSURE FROM TAPERING UNCERTAINTYGold declined from $1,795/oz to $1,790/oz yesterday while EUR/USD retreated from 1.184 to 1.181, creating a headwind for bullion. However, the 10y Treasury yield eased from 1.38% to 1.32%. Investors were focused on the US JOLTS job openings report for July, which showed vacancies at 10.93 mln, almost 1 mln above the 10.05 mln consensus. This indicated that there are significant employment opportunities in the US, which implies that August's low nonfarm payrolls reading was probably explained by a lack of motivation in the working-age population. The stabilizing virus situation in the US and the end of federal unemployment benefits and expiry of the moratorium on evictions should provide a boost to the nonfarm payroll data in September and October. Comments by Fed officials provided additional headwinds for bullion yesterday. Dallas Fed President Robert Kaplan said he would like the tapering to be announced at the September 21-22 meeting and begin in October. New York Fed President John Williams also said tapering should start this year if the recovery continues to proceed as expected. Concerns over the Fed reducing QE pressured gold yesterday, causing it to lose all the positive momentum generated earlier this week by the weak employment data for August.Gold is trading just below the 1,790/oz mark as we write. Today, the market will be monitoring the ECB monetary policy meeting and US weekly initial jobless claims. We think a departure from the ECB's ultra-accommodative policy is unlikely today, particularly given the spread of the Delta strain in Germany and the fact that the EU's recovery has lagged the rebound in the US. The ECB will likely only comment on the prospects for cutting back its stimulus without providing details. Meanwhile, the consensus forecast is for 335k new jobless claims, which is below last week's figure of 340k. We expect bullion to remain range-bound at $1,775-1,790/oz SE METALS MOSTLY IN THE GREEN, CHINESE INFLATION DATA IN FOCUSYesterday, base metals mostly closed in the green, with copper an exception. Three-month LME contracts on copper fell 0.79% (-$74/tonne from the previous close) to settle at $9,267/tonne, aluminum continued its rally, surging 1.95% (+$54/tonne) to $2,795/tonne, nickel edged up 0.73% (+$142/tonne) to $19,685/tonne and zinc rose 0.45% (+$14/tonne) to $3,052/tonne.Chinese inflation data came out this morning. Producer price growth accelerated to a 13-year high of 9.5% y-o-y in August, topping expectations of 9.0% growth, while consumer inflation came in at 0.8% y-o-y, below the expected 1.0%. Taken together, these data points suggest that costs are rising, but that the higher costs have yet to reach consumers. While this could theoretically give the PBoC more room to ease policy, doing so could provide further fuel for commodity prices, so it would seem the data did not have any clear policy implications for the government. However, the stronger than expected PPI numbers indicate that China's months-long campaign to rein in raw material costs has had little effect and could thus lead to a reassessment of the strategy, which is a risk for metal prices. It is now clear that China is attempting to achieve two rather contradictory objectives: cut emissions and maintain rapid economic growth. The path it takes going forward will help set the tone for metals markets.Meanwhile, China's ongoing electricity shortages caused thermal coal futures to breach CNY1,000/tonne ($155/tonne) in Zhengzhou yesterday for the first time ever. With demand at recent highs and supply constrained by the country's environmental goals, prices are expected to remain elevated for some time to come, until imports are able to make up for the