USD/CAD: Canadian dollar plummets as OPEC maintains production levels
The commodity-sensitive Canadian dollar declined sharply against its US counterpart Thursday, after the Organization of the Petroleum Exporting Countries announced it would not cut oil production despite sliding prices.
The loonie, as the Canadian dollar is known, declined 0.82 percent to 0.8816 US.
The USDCAD surged back above the 1.13 handle, climbing to 1.1341. The pair brought down two intraday resistances (1.1281 and 1.1326), leaving 1.1354 as the next target.
OPEC concluded its highly anticipated five-hour meeting in Vienna, Austria on Thursday by announcing it would maintain its production levels at 30 million barrels a day, a sign oil prices may depreciate further as supply continues to run high.
OPEC released a statement following the meetings, reaffirming oil ministers’ commitment to “restoring market equilibrium.”
“As always, in taking this decision, member countries confirmed their readiness to respond to developments which could have an adverse impact on the maintenance of an orderly and balanced oil market,” the statement said.
According to Saudi Arabian Minister Ali Al-Naimi, the market will “stabilize itself eventually.” Several analysts disagree and believe OPEC would need to make significant cuts to production for prices to recover.
The 12-member organization typically responds to changes in the supply/demand balance of oil, increasing or decreasing production levels to account for global trends. Many analysts had expected the oil cartel to respond to plummeting oil prices, which have slid almost 30 percent since June.
Oil prices declined further Thursday, as global benchmark Brent fell $3.21 to $74.54 a barrel. West Texas Intermediate, the US benchmark, declined $2.83 to $70.86 a barrel.
Weak demand and booming production at US refineries have put a lid on oil prices in recent months. Combined with a surging US dollar, the rise of new technologies in North America and shifting development goals in China, prices have remained capped well below $100 a barrel. According to the International Energy Agency, the recent decline in oil prices signals a “new chapter” in the oil markets, which could impact the stability of some countries.
There are “deep structural changes at work in the oil market,” the IEA said earlier this month. “Our supply and demand forecasts indicate that barring any new supply disruption, downward price pressures could build further in the first half of 2015.”
Canada, a major oil producing nation, is highly sensitive to global demand for natural resources. Its currency will likely take an even bigger blow as global oil supplies continue to outstrip demand. Canada’s oil sands reserves, which are located in northern Alberta, are the third largest in the world behind Saudi Arabia and Venezuela. According to the Government of Alberta’s website, the oil-rich province has about 168 billion proven reserves in the oil sands region.
In other trading, Norway’s krone approached a five-year low against its US counterpart as a result of plummeting oil prices. The krone declined 1.2 percent against the greenback to reach 6.9125 US, according to Bloomberg News.
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