The price of oil is heading toward the end of the year on a high note – but the Canadian dollar isn’t going along for the ride. Despite the age-old petrocurrency adage, the loonie is stuck near the lowest level since February even as crude futures hover close to the strongest price since last summer.
The loonie tumbled 0.11 of a cent to 73.77 cents US.
Crude oil prices edged up for a fourth consecutive session on Wednesday, close to their highest levels since mid-2015 as the market awaits evidence of OPEC supply reductions in the new year.
One portfolio manager says traders are focused on the interest rate hike in the United States.
“I think the traders right now are just focused on the fact U.S. interest rates are going up, [and] Canada can’t afford to raise rates because of the slow non-oil part of the economy,” said Lyle Stein, senior portfolio manager at Vestcap Investment Management, in an interview with BNN. “And so [traders think] let’s sell Canada and we’ll worry about what happens six months from now.”
U.S. benchmark West Texas Intermediate (WTI) crude oil futures settled 16 cents higher at US$54.06 a barrel, not far from the year's high of US$54.51 reached on Dec. 12.
Brent crude futures ended up 13 cents at US$56.22 a barrel. The international benchmark hit US$57.89 on Dec. 12, its highest since July 2015.
Oil prices have gained 25 per cent since mid-November, helped by expectations for OPEC's supply cut and solid U.S. economic figures that have also bolstered equity prices.
Trading was thin, with just 294,000 front-month futures contracts changing hands, compared with a daily average of 525,000 over the last 200 days. It is expected to remain quiet for the balance of the week.
The market is taking a wait-and-see approach to the official start of the landmark deal reached by the Organization of the Petroleum Exporting Countries (OPEC) and several non-OPEC members to reduce their output. The deal is set to kick in from Jan. 1.
OPEC and non-OPEC producers are expected to lower production by almost 1.8 million barrels per day (bpd), with Saudi Arabia, OPEC's largest producer, agreeing to bear the lion's share of the cuts.
"There are mixed expectations of the cuts, trading is thin so the first two weeks of January would be critical to watch," said Michael McCarthy, chief market strategist at Sydney's CMC Markets.
"If there's any misstep or any indication of disagreement to (the deal), we would see crude prices dropping," he said.
In a sign that the world's oil major producers may abide by their agreement, OPEC member Venezuela said it will cut 95,000 bpd of oil production in the new year.
Iranian oil minister Bijan Zanganeh also said on Tuesday he expected OPEC to abide by the deal. "While competing, we do have engagement," Iranian news agency Shana quoted him as saying.
Russian oil producer Gazprom Neft (SIBN.MM) said it planned to boost oil output by 4.5 per cent to 5 per cent next year, less than it had intended before Russia, one of the non-OPEC member countries, joined a deal to cut supply.
-- With files from BNN
Advertisement