Commodities. Oil and Gold Daily - December 1, 2017

> OPEC+ meets expectations, prices remain elevated. The new front-month Brent contract for February hovered below $63/bbl early yesterday before edging up to $63.2/bbl. It eventually settled at $62.63/bbl, $0.1/bbl above the previous settlement. The obvious headline yesterday was the nine-month extension to the OPEC+ deal on the prevailing terms, something that had already been priced in for some time, as it was seen as the most likely outcome to yesterday's meeting. For more on what the deal means for the market over medium term, see today's note, "OPEC+ Meeting Results: And the Cuts Go On." The participants successfully downplayed the risk of a widely feared price correction on the day (traders had purchased put options in substantial volumes to protect themselves from a selloff). The major fear among investors was that the nine-month extension might effectively become just a three-month extension, as OPEC+ will allow the terms and conditions to be revised at the next meeting in June, leaving room for some participants to escape. Ministers very wisely calmed investors by concentrating on the fact that the main target is to draw global inventories by another 150 mln bbl, which is not going to happen before 3Q18, in the ministers' view. The insertion of a review in June (effectively a compromise for the sake of Russian producers, who need to optimize their business plans upfront) was represented as a friendly discussion over strategy to secure the hoped-for market rebalancing at a meeting that was scheduled to take place anyway. Russian officials displayed no hesitation on the day, as previously feared, and many have questioned whether this fear ever existed at all. Most market players see little upside for Libyan and Nigerian production growth next year and doubt that the combined 2.8 mln bpd output ceiling set for next year will be breached anyway, so there should be little upside for prices from this unexpected bullish development. The lack of an official communique was the only strange development on the day (one has been published since 1998), though we do not think the market will dwell on this as a worrying sign implying robust and hidden disagreements. Today, the market will be digesting the outcome to yesterday's meeting and eying the Baker Hughes rig count report at 21:00 Moscow time, with Brent likely to dip closer to $62/bbl later upon the release.
> Gold continues to slide on pickup in Treasury yields and rise in US equities. Gold was traded just below the $1,285/oz mark early yesterday before plummeting to $1,270/oz. Gold lost some safe-haven appeal, as investors turned their gaze to US stocks, with the Dow breaking above 24,000 for the first time and other major US equity indexes climbing for eight straight months. Our FX analysts think this move and upbeat sentiment have been driven by progress on the US tax reform front. A final vote is possible by the end of today, and if passed, the Senate and House would then aim to reconcile their differences and deliver a final bill by year end. Given that today's schedule is quiet, there is a strong downside risk for gold if the Senate passes its tax bill given a likely pickup in the dollar.