Commodities. Oil and Gold Daily - August 16, 2017

> Oil recovers amid concerns over Libyan output. The Brent October contract almost fell below the key $50/bbl support level yesterday, only to rebound later and settle at $50.8/bbl, up $0.07/bbl on the day. The rebound stemmed from rumors from Libya that production at the key Sharara oil field has recently halved after reaching 0.28 mln bpd. The drop was likely caused by security issues at the facility, as employee access is being restricted. Libyan National Oil Corporation (NOC) has confirmed there are security issues but has not commented on the production numbers nor officially confirmed any decline at all. Developments in Libya are key for the global market, as crude oil production in the country has nearly quadrupled over the past 12 months, and it is now pumping just over 1 mln bpd, with production growth at Sharara the major source of growth. Protests at the major Zueitina oil export terminal could also contribute to lower exports from the country. The likelihood of further disruptions in Libya has always been high, but we do not think the current issues are significant enough to push prices considerably higher or cause long term severe supply disruptions.
> API data showing large crude inventory draw also contributes. Brent broke above $51/bbl after yesterday's close and is trading near $51/bbl this morning on the back of strong API data, which showed a 9.2 mln bbl decline in US crude stocks to 469.2 mln bbl in the week to August 11 (versus the latest EIA figure of 475.4 mln bbl for the week to August 4), versus the 3.3 mln bbl decline expected by analysts. The drawdown was driven by imports, which fell 0.024 mln bpd to 7.6 mln bpd, and a very slight increase in refinery runs. Meanwhile, the refined product inventory data was mixed, with the spotlight falling on the gasoline data, which turned out to be bearish. Gasoline stocks rose 0.3 mln bbl, versus the Bloomberg median estimate of a 0.9 mln bbl fall, while distillate inventories dropped 2.2 mln bbl, versus no change expected.
The weekly EIA inventory report is due today at 17:30 Moscow time. We think a decline in crude oil inventories is almost a given (we expect a 4 mln bbl draw) on the back of strong refinery runs, lower imports (especially from OPEC) and with exports also likely to be higher at close to 1 mln bpd. This is likely to drive oil prices higher, with the front-month Brent contract possibly breaking above the key $52/bbl resistance level. However, the gasoline data will be key today, as it capped oil price gains last week and even forced prices to retreat straight after the report (Brent eventually rose above $53/bbl the next day). Should gasoline inventories rise in line with the API report, this would clearly cap price gains and even push Brent back down toward $50/bbl. Should the opposite happen, it would represent a pleasant surprise for oil bulls and providing extra support for oil price gains. Gasoline imports will be the determining factor. We think Brent is more likely to settle near $52/bbl today and trade around this level tomorrow.
> Gold pressured by strong US retail sales; Fed minutes eyed. Gold continued to fall and is currently trading near $1,270/oz, $20/oz below the level seen late last week and $10/oz below the level seen early yesterday. Yesterday's decline was driven by stronger than expected US retail sales data for July, which boosted the dollar index and US Treasury yields. Retail sales were up 0.6% in July, surpassing the Bloomberg consensus of 0.3% m-o-m growth. This data is key for 3Q17 economic growth, as consumer spending accounts for roughly 70% of US economic activity. Today the market will be looking out for the Fed minutes (21:00 Moscow time), which we think are more likely to drive gold closer to $1,265/oz as they are likely to give more clues regarding the timing of balance sheet tapering, providing support for Treasuries and having a negative knock-on effect on safe haven assets.