Commodities. Oil and Gold Daily - December 8, 2017

> Oil pares back losses amid rise in Chinese imports; Baker and Hughes data eyed. Brent dipped below $61.2/bbl early yesterday before starting to recover and paring back some of Wednesday's losses (early on Wednesday it almost reached $63/bbl). It broke above $62/bbl and eventually settled at $62.2/bbl, $0.98/bbl above the previous settlement. The shift higher can be linked to threats of a nationwide strike in Nigeria planned for December 18. The Nigerian oil minister has said he is eager to negotiate with unions to prevent this. A strike could provide upside for oil prices, as happened last year, when a strike at ExxonMobil in Nigeria dented production and exports.
This morning, the front-month February contract remains above $62/bbl. We think prices are likely to remain above $62/bbl for most of the day following upbeat preliminary Chinese customs data released this morning that showed a strong m-o-m recovery in oil imports in November to 9 mln bpd (back to the levels seen in September). In October, Chinese oil imports confounded the market with a 2.7 mln bpd drop m-o-m to 7.3 mln bpd. Over the longer term, we think the seasonal need to build refined product stocks ahead of the Lunar New Year (which falls in February) will be notable, driving demand for crude in December.
The Baker Hughes oil rig count is due at 21:00 Moscow time today and has recently has started to attract more attention as an early indicator of US oil production, with investors trying to gauge the response from the US shale industry to elevated prices. We retain our view that for US shale producers to rethink their business plans and strategies for next year (effectively changing it from "returns first" to prioritizing higher production at higher costs), WTI would have to breach $60/bbl, versus the current sub-$57/bbl level. For now, US production continues to rise steadily and surpassed the 9.7 mln bpd mark last week (as reported by the EIA this week). The Baker Hughes data is likely to show more rig additions and could pressure Brent back to $62/bbl or below later to finish the week on a bearish note.
> Gold continues to plummet on relentless dollar surge; US labor report eyed. Yesterday, gold retreated from $1,265/oz to approach the $1,250/oz level later in the day. After breaching this key support level, gold plummeted to a low of $1,244/oz overnight. The selloff unfolded against a backdrop of a surging dollar, with the DXY index close to breaking past the major 94 resistance level this morning. The index was at 92.5 in late November while gold was hovering just below $1,300/oz. At near $1,245/oz, gold has started to attract some demand, supported by investors looking to pick up the metal at bargain prices. The dollar continues to draw support from the developments surrounding the passage of US tax amendments. The US Congress overnight passed a temporary spending bill to avert a government shutdown from tomorrow. As our FX analysts noted today, the two week extension through to December 22 will allow for further talks on a longer-term bill and ties in with frenzied efforts to pass a tax reform bill before Congress parts for the year-end holidays.
Today, US nonfarm payrolls data is due at 16:30 Moscow time. Average earnings data will be crucial and is expected to be strong (the consensus is for a 2.7% y-o-y rise), which would imply that inflation pressure - for so long lacking - is now building and could now undermine confidence in the need for three rate hikes next year. Today we expect the data to be strong and positive, pushing gold even lower, likely closer to $1,240/oz.