Commodities. Oil and Gold Daily - November 24, 2017

> Oil prices steady amid subdued trading; WTI strengthens further. The front-month Brent contract was trading around $63.2/bbl early yesterday before dipping closer to $63/bbl. Later in the day, however, Brent started to pare back its midday losses, and the front-month January contract eventually settled at $63.55/bbl, $0.33/bbl above the previous close. Trading activity yesterday was subdued due to the Thanksgiving holiday in the US, with the spotlight remaining on the developments surrounding the Keystone pipeline disruption. WTI's continued outperformance of Brent yesterday was another highlight. The front-month spread between the two oil benchmarks has now fallen below $5/bbl, down from nearly $7/bbl earlier this month.
The Keystone disruption pushed the front end of the WTI futures curve into backwardation for the first time since late 2014. The February WTI contract had traded around $0.2-0.1/bbl higher than the January contract for most of November. Now, however, the January contract is trading at an almost $0.05/bbl premium. We note that most of the curve flattened in mid-November, shifting from the contango seen in October to its current backwardated state, which implies a tighter market and discourages oil storage at Cushing, as the prompt market price is the highest. This, in our view, should further support WTI in December. Traders are willing to sell barrels, while refineries are quickly coming back online after maintenance (runs are expected to peak in December at around 0.4 mln bpd above the latest reported level). Given the high refining margins, refiners will be more than eager to take in extra barrels. High exports from the US are also likely to support WTI. The only threat we see with the potential to disrupt these developments is end-user demand for refined products.
Today is expected to be quiet. Little information has come so far from Vienna, where OPEC's Economic Commission Board is meeting. Russian Energy Minister Alexander Novak said today at a conference in Bolivia that "specific parameters," including the length of the expected OPEC+ deal extension, would be discussed at the big meeting on November 30, so it looks like market players will be kept guessing about the outcome. Chinese customs data this morning confirmed a large drop in oil imports in October. We expect Chinese imports to pick up later this year (see our latest Oil Price Fundamentals report). We think that Brent is likely to consolidate in a $63.0-63.5/bbl range for most of the day today.
> Gold prices continue to find support from dovish Fed minutes. After easing from a high of $1,294/oz late on Wednesday to as low as $1,288/oz yesterday on profit taking, gold prices have sharply rebounded to back above $1,290/oz, which points to strong support at $1,288/oz. This morning, gold continues to trade near $1,290/oz amid subdued trading activity due to the US holiday. Today, US markets will close early, so trading volumes will likely be thin. Skepticism over the Fed's plans for tightening next year will remain in the spotlight, pressuring the DXY. But we still do not expect the dollar to weaken today, as talks to form a new government in Germany should keep pressure on the euro. Against this backdrop, we expect gold to remain bound in an elevated range of $1,288-1,292/oz.