Commodities. Oil and Gold Daily - September 22, 2017

> Oil prices elevated ahead of JMMC meeting. After hovering just below $56.2/bbl early in the day yesterday, Brent for November delivery slid to an intraday low of $55.8/bbl midday. It then recovered and eventually settled at $56.43/bbl, up $0.14/bbl on the day. That is nearly $1/bbl higher than the level at which front-contract Brent closed last Friday and is also very close to its YTD high of $57.1/bbl, recorded in early January. Ahead of the meeting of oil ministers of the countries party to the OPEC+ deal (the JMMC) in Vienna today, Brent is close to that psychological, and thus sensitive, level. As a result, the outcome of the meeting and following remarks may be able to shift prices lower. The market is looking at two things in the meeting: whether the JMMC will officially recommend an extension of the deal for OPEC's November meeting and whether Nigeria will be brought into the deal before it officially expires. If the JMMC recommends an extension, this will be a very bullish development since many ministers have downplayed the likelihood of it happening. For example, Russian oil minister Alexander Novak said yesterday that it was still too early to talk specifics about an extension. But the inclusion of Nigeria is more realistic. In fact, this morning, the Nigerian oil minister said Nigeria would join the deal, and, as a result, Brent has gained almost $0.2/bbl to $56.6/bbl.
We do not think that the JMMC will agree to extend the deal (by talking down the likelihood of an extension, ministers, interestingly, have set up a situation in which they could "pull a rabbit out of their hat," though), leaving the market rather disappointed given the expectations that the global market will remain oversupplied in 2018 and beyond (as projected by analytical firms). Thus, we think that prices will come under pressure today, with front-month Brent, supported by the inclusion of Nigeria, possibly finishing closer to $56/bbl. If, however, the JMMC proves us wrong about an extension, then a break above $57/bbl will definitely be possible.
> Gold stabilizes after hit by hawkish Fed. Throughout the day yesterday, gold prices continued to slide on bearish momentum generated by hawkish comments from the Fed on Wednesday. On the day, gold lost almost $10/oz to $1,290/oz. This morning, however, it has started to pare losses, rising to above $1,295/oz, on a weakening DXY Index and a harsh statement from North Korea. Geopolitical uncertainty is once again in the spotlight after Pyongyang said it was considering testing a hydrogen bomb over the Pacific Ocean in response to Donald Trump's remark that the US could "totally destroy" North Korea. Gold's safe-haven appeal will push it closer to $1,300/oz today, in our view. The market will also be paying attention to ECB President Draghi's speech (at 11:30 Moscow time) and UK PM May's remarks on plans about Brexit, which could, in what would be good for gold, provide some support to the euro and weigh on the DXY.