Commodities. Oil and Gold Daily - December 19, 2017

> Oil stable amid suspended strike in Nigeria and EIA productivity report. Front-month Brent made gains early yesterday to reach an intraday high of $63.9/bbl before starting to slide. After choppy trading around $63.5/bbl, it retreated again and came just short of breaking below $63.0/bbl. It eventually settled at $63.41/bbl, up $0.18/bbl over the session. The pullback from the intraday high followed news that Nigeria's powerful white-collar oil union had suspended a long-planned strike on its first day. The union's president announced that workers who had been laid off would be recalled. The main bone of contention was local oil companies' ability to hire and fire union members and other employees at their discretion. The union leader said the strike could resume if other domestic companies fail to meet the union's requests by the third week of January, which could lead to a "full-blown industrial crisis." Hence the threat of a nationwide strike remains and could push oil prices higher, as happened last year, when a strike at ExxonMobil's operations in Nigeria dented the country's oil supply, cutting off 0.55 mln bpd of volumes for around a week. Energy Aspects notes that this time around, many see the potential impact as much greater, since the union called on all of its members, covering more than 100 oil companies operating in Nigeria, to strike.
The latest EIA drilling productivity report indicated that US tight oil production will continue to increase in January. The EIA expects it to rise 0.094 mln bpd m-o-m to 6.41 mln bpd (total US production stands at 9.78 mln bpd, according to the latest EIA inventory report). This will be driven by increased drilling in the Permian and Eagle Ford basins in Texas and in North Dakota's Bakken play. The EIA also noted another increase in the total number of drilled but incomplete wells in November to a total of 7,354, up 94 over the month. The agency projects growth of 0.78 mln bpd to an average of 10.02 mln bpd in 2018.
This morning, oil prices are finding support as investors are starting to price in a decline in US crude stocks in the forthcoming API report, due overnight at 00:30 Moscow time (the median estimate of a Bloomberg survey suggests a 3 mln bbl w-o-w decline). We think a crude oil drawdown would struggle to offset the bearish effects of an expected build in gasoline (the Bloomberg median estimate suggests a 2.4 mln bbl w-o-w rise), pressuring Brent to $62.5/bbl later tomorrow. Brent is likely to remain within the $63-64/bbl range today.
> Gold supported by tax bill vote in US. After sliding to an intraday low of $1,253/oz early yesterday, gold began to climb and eventually peaked at $1,264/oz. This morning, gold remains at the upper end of the $1,260-1,265/oz range, with investors eying the vote on the final version of the US tax bill later today by the House of Representatives. Should the bill be passed, the Senate (after a compulsory 10 hours of debate) would most likely follow with a vote tomorrow (some even expect it to vote later today). The House and Senate must approve the bill, and only after that can the president sign it into law. The House is widely expected to pass the bill today, so we do not expect this development to undermine gold prices today, and we see it holding within the current $1,260-1,265/oz range today. Our FX analysts see two Fed rate hikes next year given low inflation and the flattening yield curve.