Commodities. Oil and Gold Daily - September 25, 2017

> Oil prices draw support from upbeat JMMC comments. After trading near $56.40/bbl early on Friday, Brent for November delivery started to climb and eventually settled at $56.86/bbl, up $0.43/bbl on the day. The JMMC meeting provided the most obvious headline on Friday, with the market focusing on two things: whether the JMMC will officially recommend an extension to the deal at OPEC's November meeting and whether Nigeria will be brought into the deal before it officially expires. None of the above materialized on Friday, as we expected, and we had thought this would push prices lower given that Brent is currently close to psychological resistance levels and hence sensitive YTD highs. However, the lack of a recommendation to extend the deal failed to undermine the bullish market sentiment driven by the ongoing market rebalancing, as ministers delivered a series of upbeat, market-pleasing comments.
Following the JMMC meeting, Venezuelan Oil Minister Eulogio Del Pino was upbeat, saying that "we're going to take decisions" at the November OPEC meeting. Other ministers quite rightly drew attention to recent market rebalancing. Kuwaiti Oil Minister Essam al-Marzouq pointed out that the oil market has markedly improved in the past two months and is on its way toward rebalancing. The statistics support this view, and ministers mentioned that OECD oil and product inventories were 170 mln bbl above the five-year average in August, half the level seen in January this year. Another important and sensitive issue addressed at last week's meeting was the monitoring not just of production but also of export levels, with the JMMC agreeing to keep a close eye on both. In our view the JMMC has left its options wide open ahead of the November OPEC meeting, with an extension to the deal for at least another quarter and the inclusion of Nigeria definitely in the cards.
> Gold pressured by German elections via EUR/USD. On Friday, in light of dollar weakness, gold prices tried to pare back some of the losses made earlier in the week but fell just short of the 1,300/oz mark. This morning, euro weakness has had a detrimental impact, driving the dollar higher and gold down to $1,290/oz as we write. Major Western currencies are being buffeted by the German election results, where Chancellor Merkel won a fourth term but in a far from convincing fashion. The biggest blow to the euro came from the success registered by the far-right AFD, which finished third and won seats for the first time (for more details see today's Russia FX Beat). Given the slight reduction in geopolitical tension over North Korean, with the US and China promoting a military-free solution to the conflict, and given current dollar momentum, we continue to stick to our view that gold is likely to consolidate within the $1,280-1,290/oz range over the short term.