Commodities. Oil and Gold Daily - November 29, 2017

> Oil retreats on OPEC deal concerns...The front-month Brent contract was trading around $63.70/bbl early yesterday before sliding closer to an intraday low of $63.14/bbl later. It eventually pared back some losses and settled at $63.61/bbl, $0.23/bbl below the previous settlement. Investors are starting to worry about the outcome of the OPEC+ deal. With just one day before the main meeting, no clear signs have emerged that a consensus has been reached. Yesterday, the Joint Technical Committee (JTC) recommended extending the deal all the way through to end 2018. The Joint Ministerial Monitoring Committee (JMMC), which meets today, can then, based on the JTC report, recommend to the main body that the deal be extended. Today's post-meeting comments will be important, as they are likely to shed some light on Russia's most recent stance. (Energy Minister Alexander Novak is one of the chairs of the JMMC). The Kuwaiti oil minister, also a JMMC chair, has been one of the skeptics of a nine-month extension, yesterday said that "we support an extension but we haven't agreed on a target." The ability to agree on crucial details today will be key for tomorrow. The scale of US shale production next year is a major stumbling block. When reporting to OPEC last week, top industry analysts expressed very different views, ranging from growth of 0.5 mln bpd to 1.7 mln bpd y-o-y. We expect the first JMMC comments to arrive around 14:00 Moscow time today. We advise keeping a close eye on this, given that prices could swing in either direction, depending on how much unity appears to have been achieved. We expect the JMMC to recommend extending the deal but without a specific timeline (many options are currently on the table). We think this type of recommendation would pressure oil prices this afternoon.
> ...and on API report of US crude stock build. Post-settlement, prices retreated once again, and this morning the January contract is hovering above yesterday's intraday low of $61.14/bbl. Prices came under pressure on API data indicating a 1.8 mln bbl gain in US crude stocks to 457 mln bbl in the week to November 24 (equaling the EIA's figure of 457 mln bpd for last week), versus the Bloomberg median consensus of a 3 mln bbl decline. The jump in crude was driven by a 0.57 mln bpd w-o-w rise in imports. Most notable was a large 3.2 mln bbl draw at Cushing due to the Keystone disruption, with WTI once again strengthening against Brent following the release. We do not expect the EIA data (due at 18:30 Moscow time today) to show a weekly crude stock build; rather, we think it will be in line with the API Cushing estimates, which should support oil prices later in the day (especially WTI). This would likely support oil prices later in the day (especially WTI) and could help mitigate some of the damage if the market takes the JMMC recommendation negatively.
> Gold range-bound despite North Korean missile launch as dollar strengthens. Gold was trading around $1,295/oz for most of the day yesterday, staying within a corridor of $1,291-1,296/oz. Despite the stronger dollar, it remained at elevated levels, supported by a rise in geopolitical uncertainty. Safe-haven demand was fueled by North Korea's ballistic missile test overnight. We pointed out the possibility of this yesterday, following Japan's announcement that it had detected radio signals hinting at a possible launch. The launch itself has not triggered a rally in gold prices, as many investors are still waiting to see how the US will respond. A possible pickup in military activity would likely push gold higher. We do not think that the US will provide a resolute response today and believe yesterday's uncertainty premium is likely to shrink as a result.
Our FX analysts noted today that incoming Fed chair Powell's testimony yesterday passed off smoothly. He commented that the case for a December rate hike was "coming together." US treasury yields found little support as a result. Today, investors will focus on current chair Janet Yellen's testimony to Congress at 18:00 Moscow time and a revised US 3Q GDP growth estimate at 16:30 (a revision from 3.0% to 3.2% is expected). Considering the above factors, we think that gold is likely to slip to the lower end of the $1,290-1,295/oz range later today.