Commodities. Oil and Gold Daily - November 10, 2017

> Oil prices buoyed by planned Saudi December export cuts. Front-month Brent traded around $63.5/bbl yesterday before climbing above $64/bbl and eventually settling at $63.93/bbl, $0.44/bbl above the previous settlement price. The Saudi Energy Ministry yesterday announced plans to lower December global shipments by 0.12 mln bpd m-o-m to roughly 7 mln bpd. Saudi officials had previously stated the country would not meet waterborne demand for its crude in November, with plans to ship just 7.15 mln bpd, according to figures from the Oil Ministry. According to the latest Reuters estimates, Saudi Arabian seaborne crude exports stood at 6.71 mln bpd in September and 6.98 mln bpd in October. The winter export program tends to be higher than the summer equivalent due to lower domestic crude oil demand. If everything goes to plan, November and December exports will be 0.1 mln bpd and 0.2 mln bpd lower y-o-y, following a drop of 0.4 mln bpd y-o-y in October. The plans to decrease December allocations come after the country raised its official selling prices over international benchmarks for December loadings. The price increases were driven by strong demand and also by high refining margins. December demand is in fact expected to be strong, and according to Energy Aspects, December refinery runs will be up 1.1 mln bpd m-o-m to 29.7 mln bpd in Asia, up 0.7 mln bpd to 19.2 mln bpd in North America (both regions are key destinations for Saudi crude) and up 2.4 mln bpd to 83.6 mln bpd globally.
We think this is a strong, fundamentally bullish development that will induce market rebalancing at year end. OECD commercial oil and refined product inventories are currently estimated to be 120 mln bpd above the five-year average, and given strong winter demand, this surplus is likely to shrink further (in January it stood at 322 mln bpd). Much will depend on the US and its crude exports given that high refinery runs and lower imports are almost secured given the above data. Today, investors will eye the release of the Baker Hughes oil rig count data at 21:00 Moscow time. The slowing rig count that started back in August was emphatically underscored last Friday, when an eighth consecutive week of declines drove Brent $1.2/bbl higher to above $62/bbl. Given that the EIA recently raised its US production growth forecast for 2018, we do not think a further decrease in the rig count today would drive oil higher; in fact, we think the opposite is more likely.
> Gold stable amid holdup to US tax cut plan pressuring DXY. Gold hovered above $1,280/oz early yesterday before breaking above $1,288/oz on a couple of occasions. The surge was accompanied by a weakening dollar triggered by the release of the Republicans' Senate tax reform plan, which includes a delay to the corporation tax cut until 2019. Our FX analysts noted today that this goes against both the House plan and also President Trump's ambition to reduce the corporate tax rate from 35% to 20% next year. This morning, gold has eased from yesterday's highs and is trading in the middle of the $1,280-1,285/oz range, holding above $1,280/oz for the third session in a row. Today's schedule is quiet, with gold likely to defend the $1,280/oz support despite the recent recovery in US Treasury yields.