Commodities. Oil and Gold Daily - June 21, 2017

> Oil plummets on oversupply fears as API data provides no support. Oil prices have been weakening for a month but plunged $1.6/bbl intraday yesterday to $45.5/bbl before recovering somewhat to settle at $46.02/bbl, down $0.89/bbl on the day. Yesterday's slump was not triggered by any specific data or news release and was rather the result of a snowball effect created by a number of recent bearish developments, despite the efforts by OPEC and its production cut allies. The market appears to be speculatively testing this year's lows step by step, with strong production growth in Nigeria and Libya and also weak, counter-seasonal gasoline demand in the US allowing it to do so. The full extent of these factors on the oil market this year is yet to be established, but the prevailing negative sentiment does indeed pave the way for such sharp speculative moves. The current negative momentum can only be overturned if the factors mentioned above undergo a turnaround. This is also the reason why investors did not take yesterday's API US inventory data positively.
The data showed a 2.7 mln bbl decrease in US crude stockpiles in the week to June 16, to 508.6 mln bbl. The decrease in headline inventories exceeded the Bloomberg median estimate of a 1.2 mln bpd reduction and was driven mainly by a fall in imports. Last week, the EIA estimated that US crude inventories had risen to 511.5 mln bbl in the week to June 9 (2.9 mln bbl above the latest API figure). The bearish momentum was driven by developments in refined product inventories. Gasoline stocks once again expanded, this time by 0.35 mln bbl, mostly in line with the expected w-o-w increase of 0.5 mln bbl (the Bloomberg median estimate). This means that US gasoline demand continues to lag refinery runs and growing gasoline production in general. Distillate inventories were up by 1.8 mln bbl, while the market had expected a 0.5 mln bbl rise. End-user demand is a crucial factor for the oil market, particularly this year, as it will determine the level of refinery runs. The EIA numbers covering the same period as the API data is due today at 17:30 Moscow time.
> Gold prices stabilize but remain under pressure. After sliding almost $50/oz from this year's highs in early June, the gold price is now trying to find support and has stabilized in the $1,240-1,250/oz range. Dovish comments from Dallas Federal Reserve Bank President Robert Kaplan late yesterday cooled a two-day bullish run in the dollar. Kaplan said he would rather adopt a wait and see approach to US inflation before deciding on further rate hikes. Sluggish inflation despite the strong labor market continues to leave investors and Fed officials guessing over the actual magnitude of economic growth this year. Annual inflation has now declined for three months in a row, with the Personal Consumption Expenditures price index falling to 1.7% in April and the core PCE (excluding volatile food and energy prices) hitting 1.5%, below the Fed's 2% inflation target.