Loonie weakens as oil prices pull back
- Author: Ronnie Bowen Jun 04, 2017,
Jun 04, 2017, 6:28
Regarding the effect of the proposed partial sale of US Strategic Petroleum Reserve (SPR) on OPEC deal, the analysts noted that the impact on oil prices from a gradual sell-off of the SPR is likely to be small as commercial stocks are falling.
But the news that the cuts will be extending for nine months past the end of June has sent the price of oil tumbling.
Thursday's decision by the Organization of the Petroleum Exporting Countries - now at 14 members with the entry of Equatorial Guinea - and 10 other countries led by Russian Federation, means that the reductions of 1.8 million barrels a day agreed on in November will stay in place until March.
Oil prices slipped further on Friday following an OPEC-led decision to extend current production curbs that investors gauged did not go far enough to reduce a global supply glut.
OPEC has a self-imposed goal of bringing stocks down from a record high of 3bn bbls to the five-year average of 2.7bn bbls.
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Minister in Prime Minister's Department Datuk Seri Abdul Rahman Dahlan, after a meeting between OPEC and non-OPEC countries in Vienna, Austria yesterday, said this was part of its effort to stabilise global oil prices.
Light sweet crude oil (WTI) futures plunged 2.46 dollar or 4.79 percent to close at USD 48.90 a barrel at the New York-based commodity exchange NYMEX. Crude oil prices fell quite sharply in the aftermath of this announcement however, with many investors clearly having hoped for more aggressive cuts.
But the extension had been widely expected, and traders realized that the robustness of USA shale-oil production could undermine OPEC's cuts.
Year to date, USO has added more than $125 million in new assets, but there are some signs traders are growing exhausted of the fund from the long side as USO lost almost $15 million in assets since the start of the current quarter.
The day's volumes of 1.1 million contracts of WTI were the highest since the November 30 session, when OPEC first announced cuts. The consultant group said it expects total US and Canadian oil production will rise by nearly as much as was sidelined by OPEC and its non-OPEC partners.