Commodities Daily - February 22, 2018

Oil holds up despite surging dollar amid API crude inventory draw; EIA data imminent. We think today’s EIA data, due at 19:00 Moscow time, will have a detrimental impact on prices, adding to negative EUR/USD momentum. We expect an increase in crude inventories of around 1 mln bbl on lower refinery inputs and surging oil production, but we doubt a repeat of the 1 mln bbl weekly decrease in imports that the API reported overnight. We expect the refined product data to be bullish and in line with the API estimates, as counter-seasonal strong demand is likely to have persisted last week. This will attenuate price weakness later in the day, in our view.
Gold falls following Fed minutes amid dollar strength and rising Treasury yields. Several Fed officials are due to speak today, including Bill Dudley at 18:00 Moscow time. The ECB will release the minutes to its January meeting, and our FX analysts warn that it is essential to watch closely for any hints on how quickly the ECB might bring its QE to an end toward year end. We expect gold to remain under pressure today and see it retreating closer to $1,315/oz by the end of the week given rising Treasury yields (we expect the 10y to break above 3%) and a further decline in EUR/USD closer to 1.225.