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Loonie Gains on More Hope of OPEC Cut
Published November 21, 2016
Oil prices are rising to start the week as rumours that OPEC is inching closer to a production deal continue to build
The Loonie has benefited as a result, with USDCAD trading in the mid 1.3400's after closing just above 1.3500 last week
WTI is up 1.6% to $46.60 a barrel after trading to a 3-month low just above $42 only seven days ago
The current framework for the deal hinges on Iran agreeing to freeze production at approximately 4M barrels a day (slightly higher than current levels) which seems plausible following optimistic comments from the Iranian oil minister on the weekend
Iraq is the next major hurdle with discussions on production limits being met with stiff opposition from Iraqi officials
First, Iraq is citing the need to maintain oil revenues in order to fund the fight against ISIS
Second, as stipulated under contract, Iraq would have to compensate international oil companies for limits placed on their production
These two rather salient points of contention will likely mean that negotiations will come right down to the wire and, despite the positive overtures over the weekend, a deal still looks like a 50-50 proposition
The economic calendar is rather robust ahead of US Thanksgiving on Thursday
Canada reports wholesale trade today and retail sales data Tuesday
Meanwhile, the US reports existing home sales on Tuesday and durable goods and consumer sentiment on Wednesday (Chart 3)
USDCAD continues to exhibit bullish divergence on the weekly chart with near term support and resistance for USD coming in at 1.34 and 1.3575 respectively
Charts: (1) USDCAD bias to the topside. (2) USD Index breaks out. (3) Economic Calendar.