Commodities. Oil and Gold Daily - July 21, 2017

> Brent unlikely to hold above $50/bbl ahead of rig count data and JMMC meeting. The Brent September contract was trading at around $49.7/bbl at the start of the day yesterday, before breaking above the key $50/bbl resistance level midday. The gains, however, were short-lived, and the front-month Brent contract eventually settled at $49.3/bbl, down $0.4/bbl on the day. Today market players are waiting for the Baker Hughes rig count data due at 20:00 Moscow time. Last week's data encouraged the oil bulls, showing only a two-unit rise in active US oil rigs, to 765. The pace of weekly rig additions has been on the decline for around five months now, a trend which contributed to a rise in drilling costs in 2Q17, the first since 1Q14, according to data from the US Bureau of Labor Statistics. This year drilling costs were slow to react to the rapidly rising rig count, as machinery owners were fiercely competing for contracts back in 2016, when the industry was less healthy amid lower oil prices. The rig count numbers today might fuel even more optimism, though we do not think that the data will have a significant impact on prices, as attention is now focused on the Joint Ministerial Monitoring Committee (JMMC) meeting scheduled for July 24 in St Petersburg. This meeting will go a long way in determining which side of the $50/bbl mark Brent will trade on for the rest of the summer. Our take is that the meeting will not result in any specific recommendations to OPEC, such as production cut targets for Libya and Nigeria. The committee is more likely to simply recommend that OPEC should move to moderate crude oil production in the two countries. The lack of a bullish surprise would most likely drive prices lower and upset the oil bulls. For the time being, we continue to stick to our view that the market is not yet ready to trade Brent above $50/bbl and see resistance at this level as strong.
> ECB outcome drives gold prices higher via stronger euro. During the first half of the day yesterday, gold fell almost $7/oz to an intraday low of $1,235/oz ahead of ECB President Mario Draghi's press conference following the European regulator's monetary policy meeting. The speech was dovish in tone, with no specific date set for further discussions on altering the central bank's stimulus program. However, Draghi did provide investors with a vague signpost by saying that discussions on the tapering of quantitative easing would occur in the autumn. The implied increased likelihood of a tightening in monetary policy next year led to a surge in the euro, which pressured the dollar. This helped gold advance as much as $13/oz to trade at $1,248/oz this morning. The rise in gold prices was also made possible by little-changed global bond yields. Yields could have also surged following the ECB meeting, pressuring gold, a non-yielding asset, but the fact that few details were provided on the timing of a tapering announcement prevented this from happening. After yesterday's price action, we think that gold will consolidate at $1,245/oz and record a $15/oz gain for the week.