Commodities. Oil and Gold Daily - November 3, 2017

> Oil prices find support from Iraqi October export data... After trading above $60.50/bbl early in the day yesterday, Brent for January delivery started to slide, coming very close to breaking below $60.00/bbl midday. Later on, however, it started to pare losses and eventually settled at $60.62/bbl, up $0.13/bbl on the day. Yesterday, the Iraqi oil ministry announced that oil exports from its ports had averaged 3.35 mln bpd in October, up by 0.1 mln bpd m-o-m, as the country was attempting to make up for export volumes lost from its north. Recall that those exports have declined because of the Kurdistan situation, as central government forces have seized key oil fields around Kirkuk. According to the local production operator, exports via the Kirkuk-Ceyhan pipeline averaged 0.42 mln bpd in October, down 0.18 mln bpd m-o-m. Hence the net m-o-m loss in exports amounted to 0.08 mln bpd in October. This should be reflected in the monthly OPEC and IEA reports scheduled for release on November 13 and 14, respectively, and support prices. Still, we do not expect it to be a strong bullish factor, since port exports, according to government plans, will rise another 0.1mln bpd m-o-m to 3.45 mln bpd in November. Moreover, Iraq and Kurdistan have agreed to work together to restore oil production this month.
> ...amid contract dispute in Libya. Libyan production is currently just below 1.0 mln bpd, up around 0.3 mln bpd from the rate seen in late 2Q17. That was when the National Oil Corporation (NOC) renewed cooperation with oilfield services company Wintershall after a contract dispute had led to production shutdowns earlier in 2017. But yesterday, NOC reported that 0.05 mln bpd of production had been shut down, linking that to negotiations over a new contract and expressing concern that Wintershall had not consulted it before the closure. The chairman of NOC said that if Wintershall was not willing to agree to new terms, "it is free to leave." Given the latest developments, we urge investors to start monitoring the situation closely. If another dispute materializes, a large loss of production will follow, supporting prices.
> Russia remains cautious on OPEC+ deal extension. In late October, Russian Energy Minister Alexander Novak said that an extension of the OPEC+ deal would need to be agreed to in the winter, when demand for oil usually falls. This comment may have been intended to help to push the decision off until after the winter balance data comes out. This seems wise to us given that the global surplus is shrinking fast and that one of OPEC's main goals is to avoid shocks for consumers. Yesterday, in a meeting with Saudi King Salman in Riyadh, Novak reiterated his stance, saying that Russia was "ready to consider an extension" but would only agree to one if it saw that the market was not rebalancing. This makes us a bit nervous ahead of the OPEC meeting. We think that the market could be getting ahead of itself in pricing in an extension to end 2018.
> Gold range-bound amid economic and political events; US jobs report eyed. As expected, yesterday's trading session was very choppy. Gold fluctuated within a $1,274-1,284/oz range, driven by a variety of factors. Midday yesterday, US House Republicans unveiled their bill to cut taxes that would affect individuals and businesses alike. In theory, tax cuts should support the dollar, as they should drive US economic growth higher. However, yesterday we saw the dollar retreat after the plan was released, pushing gold higher. This was likely because the proposed tax cuts were large enough to incite concern in the market that sufficient support in Congress may fail to materialize. The DXY Index, however, quickly pared its losses, and gold stabilized near $1,276/oz later in the day, showing little reaction when Fed Governor Jay Powell was confirmed as President Trump's nomination to take over the Fed in February. Today attention will turn to the US October jobs report due at 15:30 Moscow time. Payrolls are expected to exceed 300,000 following September's hurricane-depressed figure. More important will be the average earnings data. Slightly later, at 17:00, the nonmanufacturing ISM survey will be released. We see gold remaining range-bound, perhaps pressured by economic data toward the lower end of its $1,270-1,275/oz range.