Commodities. Oil and Gold Daily - September 12, 2017

> Oil prices steady as OPEC monthly report, US inventories eyed. After trading near $54/bbl early in the day yesterday, the Brent November contract retreated to an intraday low of $53.06/bbl before quickly paring back losses to eventually settle at $53.84/bbl, up $0.06/bbl on the day. This morning, the front-month contract continues to trade just below $54/bbl, as investors eye today's release of the monthly OPEC report, which is expected at around 13:00-14:00 Moscow time (last month's report was released at 13:45). We do not expect the release to rattle the market; rather, we think it will keep front-month Brent trading around the $54/bbl mark on improved sentiment. The report is widely expected to show that total OPEC crude output, including from countries not obliged to cut, decreased in August. This would be largely driven by the disruptions in Libya.
Bullish developments are also expected from the figures showing compliance with the output cut deal. The countries obliged to cut production are expected to perform better m-o-m. Compliance in July was at around 87%, down from the 100% seen earlier in the year. The expected improvement in August should be driven by Iraq, Saudi Arabia, Kuwait and Venezuela. A Reuters survey earlier this month showed that output in the countries party to the deal had in fact come down m-o-m in August, by 0.06 mln bpd to 29.93 mln bpd. Today's OPEC report is expected to show a 0.1 mln bpd decrease to closer to the 30 mln bpd level.
It will, however, not take investors long to turn their attention to the US API inventory report, which is due at 23:30 Moscow time. This will give an indication of the extent of the impact of the recent severe weather in the US. Given the fact that the last set of data was for the week ending September 1 and did not capture the full impact of the refinery closures, we think that a rise in oil stocks is a given. What could move the price is whether the buildup exceeds expectations (the current Bloomberg median estimate is for a 4.8 mln bbl increase).We think that an increase above the estimate is likely and thus expect pressure on prices following the API release.
> Gold's uncertainty premium is shrinking, CFTC points to further selloff. Since the New York open yesterday, gold prices, which had been trading in a range of $1,335-$1,340/oz, have been on a continuous slide, to as low as $1,325/oz, reached this morning. This is once again attributable to a calming in North Korea-related tension; the country has not launched a new missile since it conducted a major nuclear test on September 3. That test has resulted in new UN sanctions on the country's textile exports and crude oil imports, which were unanimously imposed by the UN Security Council yesterday (note that China is its largest trading partner in both commodities). Given that Pyongyang has threatened to make the US pay for further sanctions, it is hard to call this a de-escalation. As a result, safe-haven assets are likely to remain at elevated levels (above $1,300/oz in the case of gold) with uncertainty premiums dropping closer to the key support level of $1,300/oz.
CFTC data for the week to September 5 indicated that hedge funds continued to add to their long positions in gold for the eighth week in a row, while reducing their shorts for the seventh week in a row and to negligible levels. The ratio of long to short positions currently stands at an unprecedented 20.1 to1, which is nearly double the previous high of 13.2 to 1, which was seen last September. As history has shown, such a severe skew leaves gold vulnerable to a sharp correction on profit taking (for example, gold plunged by $80/oz late last September).