Commodities. Oil and Gold Daily - January 12, 2018

> Oil stable amid reported fall in Chinese December imports; rig count data eyed. Brent for March delivery continued to trade above $69/bbl yesterday, and even managed to slightly break through the key $70/bbl resistance level later in the day. It eventually settled at $69.26/bbl, up $0.06/bbl on the day. This morning, it is being pressured toward $69/bbl by downbeat preliminary Chinese customs data that showed a strong 1 mln bpd m-o-m decrease in oil imports in December to 8 mln bpd, 0.6 mln bpd lower y-o-y. This is the second lowest monthly reading of 2017, only the October reading of 7.3 mln bpd lower. In addition, many had expected imports to be closer to 9 mln bpd, as there is a need to build refined product stocks ahead of the Lunar New Year (in February). If the preliminary reading is later confirmed, Chinese 2017 imports will average 8.4 mln bpd, exceeding the 2016 average by 0.8 mln bpd. Energy Aspects estimates that China added 50 mln bbl to its strategic petroleum reserves (the national statistics office announced that strategic reserves totaled 275 mln bbl last summer) and 100 mln bbl to its commercial inventories in 2017. This year, China is expected to build its strategic reserves by another 50 mln bbl and commercial stocks by 80 mln bbl. We think that the monthly decrease in oil imports will pressure Brent below $69/bbl by midday today. Later on, we expect Baker Hughes to report (at 21:00 Moscow time) the first increase in the US oil rig count since early December, solidifying Brent in a $68-69/bbl range.
Today, investors will be watching the White House's announcement about whether it will extend sanction waivers for Iran as part of the nuclear deal with the country. The decision is important for the oil market because it has implications for supply. If the waivers are not extended, we think that Iranian exports could fall up to 0.3 mln bpd, which is equivalent to the amount Russia cut under the OPEC+ deal. Thus, a decision against extension would be very bullish for the market, especially immediately following its announcement. We still think that President Trump will extend the waivers today, and will keep doing so in the next few years, leaving the nuclear deal in place but also pressuring Iran with new sanctions unrelated to the deal. Even if we are right about today, the market can relax only for so long, as the tension between the US and Iran will remain.
> Gold continues to rise as the dollar weakens. After trading in the $1,315-1,320/oz range during the first half of the day yesterday, gold began to surge as the dollar retreated. It eventually ended the day in the middle of its new $1,320-1,325/oz corridor. Gold extended its gains this morning, ascending closer to $1,330/oz, which is concerning given that the DXY dollar index has not moved much since late yesterday and that Treasury yields are also recovering (which usually exerts pressure on gold prices). We partly attribute this to Asian markets' delayed reaction to the events late yesterday. The main factors behind gold's recent push higher were below-expectations US PPI data and the rather hawkish minutes to the ECB's December meeting, which caused the euro to strengthen against the dollar. Today, US CPI and retail sales data for December is due at 16:30 Moscow time. Our FX analysts assume that the CPI will follow the lead of the soft PPI data, so the dollar could come under further pressure. Given this, we think that gold will continue to rise today. However, after its sharp gains this morning, the upside seems limited. We expect gold to end the week hovering slightly above $1,330/oz.