Commodities. Oil and Gold Daily - August 23, 2017

> Developments in Libya forced oil into sideways trading yesterday. The Brent October contract started the day yesterday on a positive note, but after reaching $52.25/bbl, it slid to an intraday low of $51.4/bbl. This move came on the back of news appearing that the major Sharara oil field in Libya had reopened after what appears to have been a blockade by the Zintan Brigade, which started on Saturday. However, this report was refuted within minutes by the Libyan National Oil Corporation, which removed the announcement of the field's reopening from its website. Front-month Brent reacted quickly to the retraction, rebounding back from an intraday low to $52.2/bbl. Later in the day, however, security forces did manage to open a valve on the pipeline that connects the field to the Zawiya port, which allowed operations to resume. October Brent eventually settled at $51.87/bbl, up $0.21/bbl on the day. Nevertheless, the situation in Libya remains shaky, and further disruptions - with a subsequent rise in oil prices - may very well be in the cards.
> API disappoints bulls, Chinese customs confirms July drop in imports. Front-month Brent retreated closer to $51.5/bbl after yesterday's close and is trading around this level this morning on the back of mixed API data, which showed a 3.6 mln bbl decline in US crude stocks to 465.6 mln bbl in the week to August 18 (versus the latest EIA figure of 466.5 mln bbl for the week to August 11), versus the 3.5 mln bbl decline expected by analysts (Bloomberg median estimate). The drawdown was driven by lower imports (down 0.081 mln bpd to 7.5 mln bpd) amid a slight drop in refinery runs. Meanwhile, the refined product inventory data was bearish. The spotlight, therefore, fell on the gasoline data, which showed stocks up 1.4 mln bbl, versus the Bloomberg median estimate of a 1.2 mln bbl fall. Distillate inventories increased 2 mln bbl, versus no change expected. The weekly EIA inventory report is due today at 17:30 Moscow time. The gasoline data capped oil price gains both last week and the week before and will be key again today. Should gasoline inventories rise in line with the API report, it would clearly cap price gains and even push Brent back down toward $50/bbl. The opposite would be a pleasant surprise for oil bulls and would provide extra support for oil price gains.
Prices seem unnerved by the weak data from China released earlier today. Chinese customs confirmed a preliminary m-o-m decrease in crude imports in July. We see lower imports in 3Q17 as almost inevitable, as Chinese majors kept buying crude in 1H17 for the upcoming refinery starts and expansions. Much of the crude was put into storage ahead of test runs. This and the likelihood that Chinese majors will be forced to cut refinery runs in 3Q17 to drain excess refined product inventories may pressure 2H17 imports, which we think will be below the 1H17 average. However, a recovery in 4Q17 is likely - we expect a y-o-y gain of around 0.6 mln bpd for the full year.
> Gold range-bound on Eurozone PMI and Draghi comments. Gold slipped within its recent $1,285-1,290/oz trading range yesterday on a strengthening dollar and remains close to the low end of this range today. Early in today's session, gold received some support from US President Donald Trump's proclamation regarding his promised US-Mexico border wall. Trump threatened to shut down the government if Congress were to refuse to approve funding for construction. His comment only elevated the uncertainty around the upcoming budget negotiations. At the moment, gold finds itself range-bound, supported by a weakening dollar and pressured by rising Treasury yields following the release of Eurozone PMI figures that were stronger than expected. Mario Draghi's speech has also been a factor, as the ECB president defended quantitative easing and warned about new challenges that lie ahead. All things considered, we think gold will remain within its $1,285-1,290/oz range today.