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Brent Prices Soared to Highest in Over 2 Years on Pipeline Shutdown Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Tue Dec 12 17 01:53 ET

Brent crude oil prices extend the rally to a new 2.5-year high in Asia Tuesday, after soaring +2.03% on the prior day as the North Sea's Forties Pipeline system reportedly shut down. WTI crude oil prices were also helped by the news with the front-month contract adding +1.1% for the day. Prices of base metals rebounded as traders awaited China's macroeconomic data in November. Strong lending data also supported base metal prices. In the FX market, US dollar retreated ahead of the two-day FOMC meeting. In the major currency universe, New Zealand dollar was the best performer against the greenback. The over +1% gain of the kiwi was mainly driven by the appointment of Adrian Orr as the new RBNZ governor. Some believed that Orr is in the hawkish camp.

The UK's Forties oil pipeline, carrying about 450K bpd of oil to Scotland, was closed on Monday after cracks were revealed. The repair work should take a number of weeks. Brent crude oil contracts were more affected by the closure as Brent crude oil represents oil extracted from the North Sea and comprises Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (BFOE). The shutdown has also widened the WTI-Brent spread to the highest level in a month.

Ahead of the November activity data due Thursday, the Chinese government updated its credit situation. New bank loans rose to RMB 1.12 trillion in November, up +RMB 325B from the same period last year. This also beat consensus of RMB 800B and October's RMB 663.2B. Total social financing (TSF) rose to RMB 1.6 trillion, from RMB 1.04 trillion in October. Meanwhile, broad money supply (M2) grew 9.1% y/y in November, from +8.8% a month ago.

Staying in Asia Pacific, Japan's domestic CGPI growth improved to +3.5% y/y in November from +3.4% a month ago. The market had anticipated a slowdown to +3.3%. Separately, the tertiary industry index gained +0.3% m/m in October, beating expectations of a +0.2% gain and September's -0.2% drop. In Australia, the NAB business conditions index surprisingly plunged to 12 in November, from 21 in the prior month. The third quarter house price index contracted -0.2% q/q, missing consensus of +0.5% and September's +1.9% growth.

For the day ahead, headline inflation in the UK probably stayed unchanged at +3% in November. Core CPI and RPI should have also stayed at +2.7% and +4%, respectively, for the month. Germany's ZEW economic sentiment index probably slipped -0.8 point to 17.9 in December, while the current situation and expectations indices might also have eased from the prior month. US' PPI probably accelerated to +3% y/y in November from +2.8% a month ago. Core PPI might have stayed unchanged at +2.4% for the month. Separately, US' budget deficit probably widened markedly to 135.2B in November from 63.2B a month ago.


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