Commodities. Oil and Gold Daily - November 22, 2017

> Oil boosted by API report of large draw in US crude stocks. After trading in the $62.1-62.7/bbl range for most of the day yesterday, the January Brent contract settled $0.35/bbl higher at $62.57/bbl. After the close, the oil benchmark began to rise, adding $0.2/bbl before the weekly API report and another $0.35/bbl afterward. This pushed Brent close to $63/bbl, where it continues to trade this morning. The API data was bullish, showing a massive 6.4 mln bbl draw in US crude stocks in the week to November 17 (versus an expected 2.2 mln bbl decline), to 455.6 mln bbl (below the EIA's 459 mln bbl estimate from last week). We note that the API crude inventory data has been volatile recently. Last week, for instance, it showed a 6.5 mln bbl build to 462 mln bbl. EIA crude stocks, meanwhile, have been a lot less volatile, remaining within a narrow 455-459 mln bbl range since mid-October. For this reason, we think today's EIA inventory update, due at 18:30 Moscow time, is unlikely to show such a large draw. We expect a drop of 3-4 mln bbl, which would support oil prices later in the day.
According to API, the headline inventory draw was driven by a 0.44 mln bpd w-o-w fall in imports and a 0.64 mln bpd rise in refinery runs. A large 1.8 mln bbl draw at Cushing was attributed mainly to the Keystone pipeline disruption, a development we discussed in Monday's daily (we predicted a 2 mln bbl drop in Cushing stocks as a result). The draw there was especially supportive for WTI, narrowing its spread to Brent to $5.3/bbl, down from $6/bbl midday. Overnight, TransCanada, operator of the 0.59 mln bpd Keystone pipeline, said that the pipeline would run at a reduced capacity through the remainder of November, supplying around 0.15 mln bpd. This should pressure Cushing stocks and support WTI. We note that after the last Keystone spill in April 2016, it took nine days to bring the pipeline back online to run at a lower capacity.
API's refined products data was mixed. Gasoline stocks rose 0.87 mln bbl w-o-w, while distillate inventories fell 1.7 mln bbl. So far, refined product inventory levels have remained close to their five-year averages, keeping refinery runs elevated. However, the EIA's last weekly report showed signs of slowing demand. This suggests that inventories could start to swell, given how high refinery runs have been (see last Thursday's daily for more).
> Gold prices stable; Fed minutes eyed. Gold remained at the low end of its recent $1,280-1,285/oz range for most of yesterday, after breaking below $1,285/oz on Monday. This morning, the yellow metal is pushing closer to $1,285/oz on dollar weakness. Market players are waiting for the Fed to release the minutes from its November meeting (22:00 Moscow time), where rates were left unchanged. Overnight, Fed Chair Janet Yellen addressed the "mystery" of low inflation this year and said that there was "some hint" that inflation expectations were drifting lower. This suggests that the minutes could reveal a divide among Fed officials, with hawks eager to hike in light of the strong labor market and doves not seeing aggressive hikes as necessary given that inflation remains below the 2% target. Market participants will likely continue to doubt Yellen's previous guidance of three rate hikes next year until inflation starts to pick up, though a 25 bp hike on December 13 still seems like a sure thing. While we expect the dollar to be flat today (see today's Russia FX Beat), in our view, a jump in the gold price closer to $1,290/oz could be in the cards, since we expect Treasuries to weaken when the Fed minutes come out.