Today Is the Big Day for Oil – Mind the Loonie
Skerdian Meta • 2 min read
Before we forget, today the OPEC meeting is taking place in Vienna. This meeting has been announced since summer, so plenty of expectations have been accumulated during this time.
The market is pricing in a deal between the OPEC countries which will be accepted by non-OPEC countries, but we know that nothing is this straight forward when it comes to oil output. Most, if not all oil producing countries, have undiversified economies which makes them heavily dependent on oil revenue. So, will they reach a deal today, despite all the political tensions? It´s worthwhile to keep in mind that two of the major producers, Iran and Saudi Arabia, are bitter rivals in the Middle East and the tensions have been escalating quickly.
On the other hand, other countries like Nigeria, Iraq, and Libya have had been pumping way below their capacity in the recent months for different reasons, but mainly it has been war and terrorist attacks that have disrupted the oil production in these countries. Iraq is already complaining as it´s officials already commented that it is unfair to cut the oil output.
That said, most of the large oil producers are positive that a consensus will be reached today and a deal will be signed. After all, there have been so many negotiations since spring/summer that it feels like they have been going on forever.
Whatever the outcome, this meeting is a bullish event for oil prices and they have been on an uptrend in the last 6-7 trading days, which has accelerated in the last two days. WTI (West Texas Intermediate) is about $7 up from the lows after the US elections, reaching $49/barrel this morning, while Brent Crude stalled just shy of the $50/barrel resistance level.
Meanwhile, we can see the prices slip a little in the last 2 hours after the hawkish comments from Nigeria officials. The Canadian Dollar is taking full advantage of the meeting with USD/CAD, losing about 200 pips in the last few days.
If you want to trade the CAD pairs, I suggest that you be extra cautious. Even if a deal is signed today, it will likely mean that all the producers will just freeze the output near record levels for 6 months (those are the rumours) before aiming at new record output levels when the 6 month period is over. So don´t get sucked in if you see a USD/CAD jump higher today.