Another big day for oil prices! West Texas Intermediate on Tuesday settled at a premium to its global counterpart Brent crude for the first time in more than five years, and the spread between the two benchmarks is now nonexistent. While the lifting of the U.S. oil export ban and a surprise dip in inventories could be triggering the move, analysts focused on investor sentiment ahead of the holidays, with traders covering shorts and squaring away their positions. At the time of writing: Brent +1% to $36.48; WTI +0.9% to $36.48.

Economy

Meanwhile, OPEC has published its closely watched annual World Oil Outlook, which anticipates the price of its basket of crudes to rise to $70/bbl in 2020 and $95/bbl in 2040. "The impact of the recent oil price decline on demand is most visible in the short term," Secretary-General Abdullah al-Badri wrote in the foreword to the report. "It then drops away over the medium term." The forecast also underlined demand expectations for OPEC crude to reach 30.7M bpd in 2020 (that's 1.7M barrels more than projected a year ago, and 1M less than the cartel pumped in November).

The U.K. economy expanded less than previously estimated in the past two quarters, signaling growth is losing momentum and pushing an interest rate hike further away. Gross domestic product rose 0.4% between July and September instead of the 0.5% previously estimated, leaving annual growth in the third quarter at 2.1%. Yesterday, the U.S. revised its Q3 GDP down to 2%, instead of the 2.1% figure reported last month.

The Obama administration has slapped fresh sanctions on Russian businessmen and entities close to President Vladimir Putin, including subsidiaries of state banks Sberbank (OTCPK:SBRCY) and VTB, as well as defense company Rostec. The penalties are aimed at forcing Russia to stabilize Ukraine, but their timing highlights the complicated ties between the two powers and could undercut cooperation on ending the Syrian war and fighting ISIS.

Further deteriorating relations, the Russian parliament has voted to suspend its free-trade zone with Ukraine from January. Government statistics show bilateral trade has fallen from $50.6B in 2011 to just $12.5B in the first 10 months of this year. Russia is also set to extend to Ukraine the food import embargo it has imposed on European countries, a move it says is a response to Ukraine's adoption of western sanctions.

It is "very, very unlikely" there will be no default on debt next week, Puerto Rico's governor Alejandro Garcia Padilla declared, stating that the U.S. territory was evaluating which bonds are to be paid. The island first defaulted on its debt in August and has a $957M interest payment due Jan. 1. On Tuesday, Moody's downgraded $1.09B of Puerto Rico's Public Finance Corporation debt to C from Ca, noting the "diminishing recovery prospects" for the securities.

Stocks

The European Court of Justice this morning issued a preliminary ruling against Philip Morris (NYSE:PM) and British American Tobacco (NYSEMKT:BTI), stating that the EU Tobacco Products Directive of 2014 is valid. The law, which comes into force in 2016, requires pictorial health warnings across 65% of tobacco packets, a ban on menthol cigarettes by 2020, and preserves the right of member states to introduce "plain packaging" rules. The news is a heavy blow to Big Tobacco, although the court still has to deliver a final ruling.

Shire has made a sweetened offer for Baxalta (NYSE:BXLT) that values it in line with the latter's valuation expectations, making a deal possible in the next few weeks, sources told Reuters . The new offer includes enough cash to raise the value of the bid to over $30B. An agreement would successfully end Shire's (NASDAQ:SHPG) five-month pursuit and create one of the world's leading specialists in rare diseases.

While the number of announced deals declined globally this year by 2.1% to 39,687, deal volume rose 40.8% to a record $4.6T, according to preliminary data from Thomson Reuters. Notables: AB Inbev (NYSE:BUD) & SABMiller (OTCPK:SBMRY) ($106B), Shell (RDS.A, RDS.B) & BG Group (OTCQX:BRGYY) ($70B), Pfizer (NYSE:PFE) & Allergan (NYSE:AGN) ($160B), Dow Chemical (NYSE:DOW) & DuPont (NYSE:DD) ($120B). What will happen in 2016? According to investment bankers, most of the obvious mega deals have already been explored, but the number of transactions could increase as newly merged companies sell non-core assets and smaller companies consider tie-ups to stay competitive.

Turing Pharmaceuticals' interim CEO Ron Tilles isn't wasting any time making his presence be felt after the departure of former CEO Martin Shkreli. With the aim of reducing costs and realigning its business priorities, the company has streamlined its operations, including a reduction in headcount. A search for a permanent CEO is also underway, and the firm intends to expand its board to include more independent members.

Chevron has reportedly slashed more than 1,200 jobs at its massive Gorgon LNG project in Western Australia. About 530 electrical workers on the Gorgon project were laid off last week. Another 700 positions, including boilermakers, pipe fitters, welders and trades assistants, were axed in the past two weeks. CVX +0.8% premarket.

After the bruising decline seen in junk bonds so far this year, investors may need to brace themselves for another wave of defaults in the U.S. commodity high-yield sector with numerous oil price hedges expiring next summer. According to S&P Capital IQ Leverage Commentary and Data, high-yield bonds are down around 5% so far this year, with estimates for junk bond returns in 2016 ranging from a loss of 3% to a gain of 6%.

Disney is in talks to get out of its joint venture in digital network Fusion, which it launched in 2013 with Univision. The discussions concern Univision taking full ownership of the network, which includes digital properties as well as its cable channel. For Disney (NYSE:DIS), building Fusion has become less of a priority as of late, especially given the company's recent investments totaling $400M in Vice Media, which also targets millennials.

Shortly after Marcelo Claure became chief executive of Sprint (NYSE:S) last year, he paid a small team of consultants at least $25M for advice to design a network quality plan that was largely never used, WSJ reports. The sum raised eyebrows among Sprint managers, and was eventually ended by Chairman Masayoshi Son, because of the contract price and the latter disagreed with many of the recommendations. Sprint, which hasn't reported annual profit since 2006, has been borrowing to sustain its cash use and had its junk credit rating lowered by Moody's in September.

There's also trouble at America's third largest wireless carrier. YouTube (GOOG, GOOGL) is accusing T-Mobile (NASDAQ:TMUS) of throttling its video traffic, raising a new issue as federal regulators examine the wireless carrier's streaming-video strategy. T-Mobile recently began offering a program that delivers video at lower quality in exchange for waiving related data fees, but YouTube alleges T-Mobile is also reducing video quality that isn't part of the program, including YouTube clips.

Lastly, Google is building a new messaging app that enables users to text friends or a chatbot, which will search the web and other information sources to answer a question. Although it's still unclear when the company will launch the platform, it sounds like it's meant to directly compete with Facebook M, a bot that Facebook (NASDAQ:FB) is testing inside of Messenger. Google (GOOG, GOOGL) is also likely to allow other developers to build chatbots that run on the service.

Tuesday's Key Earnings

Micron (NASDAQ:MU) -5.2% AH on mixed results, light guidance.
Nike (NYSE:NKE) +3% AH following impressive futures orders.

Today's Markets

In Asia, Japan closed. Hong Kong +1% to 22041. China -0.4% to 3636. India +1% to 25850.
In Europe, at midday, London +1.8%. Paris +1.9%. Frankfurt +1.7%.
Futures at 6:20, Dow +0.4%. S&P +0.3%. Nasdaq +0.3%. Crude +0.9% to $36.48. Gold -0.2% to $1072.20.
Ten-year Treasury Yield +1 bps to 2.25%

Today's Economic Calendar

7:00 MBA Mortgage Applications
8:30 Durable Goods
10:00 New Home Sales
10:00 Reuters/UofM Consumer Sentiment
10:30 EIA Petroleum Inventories
11:30 Results of $13B, 2-Year FRN Auction