USD/CAD Could surge higher

The grennback’s strength is vanishing and today is down against its major rivals. Meanwhile it has still outperformed the Canadian dollar. The USD/CAD pair is moving higher this week and as seen on the four hour time frame tested the resistance provided by the 50% Fibonacci retracement of latest bullish run at 1.2485. The price is now developing between turning to the upside 20-day SMA and yet bearish 100-day and 200-day SMAs. Stochastic is located within extreme overbought area, but yet is aiming north. RSI is seen slightly above its mid-line and has lost directional strength. 

Adding to this picture the failure of Loonie to track the surging oil prices, the conclusion comes to unsustainable belief on oil’s further rally. And in this case the USD/CAD pair is quite undecided and hesitant. 

Technically speaking the pair should break to above the 1.2050 – 1.2515 resistance area in order to bring back bulls in the game.

  

15 countries that depend on oil exports

Next week, Saudi Oil Minister Ali al-Naimi for the first time will face the victims of his decision not to reduce oil production despite the global glut. US shale oil producers are struggling to survive the worst price collapse for years. The idea of reducing output and losing a good market share to the newbie in the industry – US shale oil producers has a strong aversion to the traditional oil producers around the world.

Oil price today is as cheap as it has not been in the last 12 years. And this is more than bad news for countries whose economies depend mainly on the export of black gold.

Meanwhile have you ever thought about which countries rely most on oil exports?

An analysis of Bloomberg estimated which countries in 2018 will depend most of its oil reserves. Absolute leader in this ranking is Brunei, with oil exports projected to make up over 60 percent of GDP. This is going to be 15 % more than the second most reliant country, Kuwait and Libya, whose economies rely on almost 50 % of oil exports.

This chart shows estimated oil exports as a % of GDP in 2018.

Oil prices tumbled to a 13-year low

Oil prices reached a 13-year low on Monday amid the lifting of sanctions against Iran, which is a member of OPEC. On Sunday, Iran announced that the country is ready to increase its exports by 500,000 barrels per day.

Responding to Tehran's compliance with a nuclear deal, the United States and major powers revoked international sanctions that had cut Iran's oil exports by about 2 million barrels per day (bpd) since their pre-sanctions 2011 peak to little more than 1 million bpd.

Iran, a member of the Organization of the Petroleum Exporting Countries (OPEC), issued an order on Monday to increase production by 500,000 bpd, the country's deputy oil minister said.

Worries about Iran's return to an already oversupplied oil market drove down Brent crude LCOc1 to $27.67 a barrel early on Monday, its lowest since 2003. The benchmark was down 29 cents at $28.64 by 1850 GMT (1350 ET).

U.S. crude CLc1 was down 48 cents at $28.94 a barrel, not far from a 2003 low of $28.36 hit earlier in the session. Trading volumes were thin with U.S. markets closed for the Martin Luther King Day holiday.

"You can't say this was unexpected but the Iran news is an additional factor that's working against oil prices," said TD Securities analyst Bart Melek, who also pointed to global oversupply and concerns about demand from China.

He said oil could fall further if Chinese economic data released overnight, including GDP and retail sales data, points to more weakness in the economy.

"If we get nasty economic numbers from China there's potential for another swoosh lower," Melek said.

Analysts expect Iran will realistically be able to export an extra 500,000 bpd in the short term from storage, but there are doubts whether the state of Iran's oil infrastructure will allow further boosts anytime soon.

SEB Markets assumes Iranian oil output will rise by 400,000 bpd to 3.2 million bpd in 2016, while Tehran has said it will add 1 million bpd to its existing output by the year-end.

Iran has at least a dozen Very Large Crude Carrier super-tankers filled and in place to sell into the market.

Ina sign of the pain low prices are inflicting on oil producers, OPEC forecastthat supply outside the organization would decline by 660,000 bpd in 2016, ledby the United States. Last month OPEC predicted a drop of 380,000 bpd.

Oil prices remain under pressure

Oil prices remained under pressure due to the weak demand, although small increases reported on Tuesday.

Persistent global production has contributed to the near-record levels of oil being pumped and a lessening of demand will hurt prices further.

Futures for WTI crude gained 0.19% to $36.88 per barrel. While Brent contracts advanced 0.11% to trade at $36.66.

While the fallout of increased production has resulted in lower prices, demand has so far kept up and even outstripped the supply.

However, that appears to be under threat as JBC Energy reports demand growth in Europe turned negative for the first time in ten months in October.

This represents a loss of 170,000 barrels per day (bpd) year-on-year while the report also highlighted the slowing demand from China as it continues to transition to the 'new normal'.

Some analysts are predicting that output will exceed demand by more than 2 million bpd, and with OPEC refusing to curb production the pressure is mounting.

As many as 64% of rigs in the US have closed this year, according to data from oilfield services company Baker Hughes, but a meaningful decline in output has yet to materialize, with the remaining producers being able to drill more efficiently.

The supply glut is unlikely to be alleviated anytime soon as Iran announced they will increase exports by 500,000 bpd within weeks of Western sanctions being lifted.

Iran has the fourth largest reserves of oil in the world and fears of a return to pre-sanction output of 2.5 million bpd could put further pressure on the fragile petroleum price.

Meanwhile, Monday's Saudi Arabian budget implied that the price war with US shale is taking its toll on the economy in the kingdom, with the government planning to spend 135 billion riyals less in 2016.

The ministry of finance was prompted to give such austere projections based on the persistent and stubbornly low oil prices. This has led them to giving reduced revenue expectations while also cutting spending.