UK is the main talking point today - BBH

Analysts at BBH suggest that UK that is the main talking point today as there are three issues and the first being the shuttering of the Forties Pipeline for emergency repairs is disrupting the oil market.  

Key Quotes

“It is a very important pipeline for the UK and for the setting of the benchmark.  The price of Bent jumped 2% yesterday and is up 0.8% today as it pushed through $65 a barrel.  WTI for January delivery is advancing, but at half the pace as Brent.  It was up 1.1% yesterday and is up 0.45% today.   It is approaching the year's high seen last month just above $59.00.”   

“Second, the UK reported greater price pressures.  CPI rose 0.3% rather than the 0.2% widely expected.  This lifted the year-over-year rate to 3.1%.  Breaching the 3% level requires BOE Governor Carney to write a letter to explain the more than 1% overshoot.  Some observers seem to exaggerate the significance of the letter. We do not attach policy significance to it.  Nor do we think it changes the outlook for this week's MPC meeting.  Moreover, the core rate was unchanged at 2.7% and CPIH (which includes a function for ownership equivalent housing costs) was unchanged at 2.8%.”  

“Third is Brexit.  Trade Secretary Fox said that the UK wanted trade agreement "virtually identical" to what they have now.  He dismissed the EU suggestion that if the UK chooses to leave the single market, a Canada-like agreement is the most that it can reasonable expect as bluster.  This is what the UK officials have argued repeatedly in recent months, the negotiations have remains stuck in stage one (the divorce) longer than anticipated.  Next week, the UK cabinet will hold its first meeting to discuss a new trade agreement.” 

“Meanwhile, the debate over what "regulatory equivalence" continues among cabinet officials.  There can be no mistake about it:  The fissures in the Tory Party over Brexit remain profound and this will hamper negotiations next year as it has this year.” 

“Sterling briefly jumped on the CPI report, but was quickly sold.  It was successfully pushed below the 20-day moving average (~$1.3345) for the first time in more than four weeks.  Bids may protect the $1.3300 area, though a break could see losses extend toward $1.3200-$1.3220 in the coming days.  Sterling is the worst performing of the major currencies, and it could be the third declining day in a row and the fifth in six sessions.   Note that there is a GBP428 mln option struck at $1.3350 that expires in NY today.”