Commodities. Oil and Gold Daily - August 9, 2017

> Oil range-bound after new EIA outlook and OPEC+ meeting. After rising to an intraday high of $52.7/bbl yesterday, the front-month Brent contract took a dip later on and closed at $52.14/bbl, down $0.23/bbl on the day. Yesterday the EIA published its new Short-Term Energy Outlook report, in which it updated its month-old forecasts for 2017 and 2018 US demand and production growth. It now expects US production to average 9.35 mln bpd and demand to rise 0.34 mln bpd this year, compared with the previous estimates of 9.32 mln bpd and 0.31 mln bpd. As for 2018, production is currently seen rising by 0.56 mln bpd and demand by 0.33 mln bpd, versus 0.57 mln bpd and 0.36 mln bpd previously.
The two-day OPEC and non-OPEC technical meeting, which concluded yesterday in Abu Dhabi, did not cause any major price shifts, although in the longer run it could lead to improved compliance. As we had expected, the meeting essentially boiled down to wrangling over the two sets of output figures - independent and self-reported - rather than any sort of broader discussion that could have moved the market. Iraq and the UAE were among the OPEC countries that tried to defend their recently weak compliance with the production-cut deal in private discussions with Russia, Saudi Arabia and Kuwait, the countries that chaired the meeting.
> API reports large crude inventory draw, but prices fail to react accordingly. Brent fell slightly below $52/bbl after the close yesterday and continues to trade close to $52/bbl this morning despite API data yesterday that showed a 7.8 mln bbl decline in US crude stocks to 478.4 mln bbl in the week to August 4, much larger than the 2.2 mln bbl decline expected by analysts. The drawdown was driven by imports, which decreased 0.03 mln bpd to 7.6 mln bpd, and a 0.09 mln bpd increase in refinery runs. The refined product inventory data, on the other hand, was bearish. Gasoline stocks increased by 1.5 mln bbl, compared with the Bloomberg median estimate of a 1.5 mln bbl decrease, and distillate inventories fell by 0.16 mln bbl, versus an expected 0.5 mln bbl decrease.
The EIA's weekly inventory report is due today at 17:30 Moscow time. In our view, it is more likely to push Brent close to $53/bbl than to cause a slide to $51/bbl, as we expect a large inventory draw driven by what would be the first decline in OPEC imports since early July. However, one factor that could prevent this from happening is an increase in gasoline stocks, as was reported by the API.
> Pressure on gold from strong US jobs data fades as geopolitical tension rises. The gold price was down almost $13/oz mid-day yesterday and reached an intraday low of $1,252/oz, pressured by more strong US jobs data, which drove the dollar higher. Yesterday's monthly JOLTS survey showed that US job openings rose to an all-time high of 6.16 mln in June, following up the strong US nonfarm payrolls data published last Friday. The tightening labor market and growing wages in the US support the dollar, which pressures gold and also creates upward pressure on inflation and GDP growth. So far there have not been clear signs of this pressure, which is one of the reasons the Fed became more dovish at its most recent meeting. The PPI data on Thursday and CPI data on Friday this week will provide further insight for the Fed on the state of the US economy and the need for a rate hike, so it should help determine the outlook for gold prices for the rest of August.
Another exchange of threats between the US and North Korea has supported gold, which is battling resistance at $1,270/oz today. In our view, the conflict escalated to a level unseen before after North Korea threatened to strike the US territory of Guam in response to Donald Trump's warning to Pyongyang that North Korea would face "fire and fury" in the event of further threats to the US. We think that the elevated tensions should keep gold within the $1,265-1,270/oz range for the time being, although tomorrow's jobless claims data from the US, due at 15:30 Moscow time, could put an end to this.