Commodities. Oil and Gold Daily - September 29, 2017

> Kurdish referendum result gives short-term support to prices. After trading near $57.7/bbl early yesterday, Brent for November settlement gained almost $0.9/bbl by midday to reach an intraday high of $58.6/bbl before retreating to an intraday low of $56.9/bbl and eventually ending the session at $57.41/bbl, down $0.49/bbl on the day. The December contract, which will become the new front-month gauge on Monday, is trading at a $0.25-0.35/bbl discount to the November contract given the backwardated structure of the Brent futures curve and yesterday closed at $57.16/bbl, down $0.41/bbl on the day.
The midday surge was driven by the results of the Kurdish independence vote in Iraq, which saw nine to one vote in favor. Kurdish leaders have said the result will not trigger a declaration of sovereignty but will act as a starting point for talks with Baghdad. In addition to Iraq's oil-rich northern territory (up to 0.7 mln bpd of oil production), Kurds have a large presence in Turkey (approximately 30 mln people), Syria and Iran, so their independence push could threaten political stability in these countries. Unsurprisingly, Turkish President Erdogan has threatened to block Kurdish oil exports through the 0.6 mln bpd Ceyhan pipeline (this is double the volume that Russia has cut under the OPEC+ deal), which has rattled the oil markets. Emotions are running high, and Erdogan's aggressive rhetoric (including threats to invade Iraq) indicate that a pipeline blockade is definitely in the cards.
We think the Kurds are indeed more likely to seek a diplomatic solution with Baghdad rather than declare independence, elevate the regional tension and expose themselves to economic isolation by neighboring countries. In our view, investors would now eye any Kurdish reaction other than negotiations as having serious consequences, and such an outcome could even take Brent above the $60/bbl level given a pipeline blockade would induce further market rebalancing. For now, we keep our view that Brent is likely to maintain downward momentum, correcting toward and then stabilizing in a $56-57/bbl range.
> Gold stabilizes as dollar fails to firm despite strong economic data. After trading in the $1,280-1,285/oz range yesterday morning, gold started to gain strength and has pushed back to the $1,285-1,290/oz corridor, supported by a weakening dollar. The dollar index started to retreat mainly on profit taking and despite upbeat economic data. The highlight of the day was an upward revision to the 2Q17 US GDP growth estimate to 3.1% (a 3% reading was expected). This provides further support for the Fed's latest hawkish stance, and given that Janet Yellen recently downplayed the role of below-target inflation, a flat Q-o-Q core PCE index reading of 0.9% yesterday should not undermine plans to hike rates one more time this year. Personal income and expenditure data at 15:30 Moscow time will shape dollar trading today. We expect both the dollar index and gold to trade flat for most of the day.