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OPEC Agrees to Extend Supply Cut; USD/CAD Reacts to Central Bank Statements

Published May 25, 2017
  • Oil prices moved between strong gains and sharp losses this morning after Saudi Arabia’s energy minister confirmed that the OPEC group will extend its current supply cut deal for another 9 months
  • Despite this, prices for the commodity have shed overnight gains and dropped over 1%; investors were disappointed after the group announced that they will keep supply cuts at current levels during the extension
  • The OPEC supply cut deal has so far removed 1.8 million barrels per day (roughly equal to 2 percent of global production) from the market in the first 5 months of 2017; US shale production has tempered most price gains from this deal due to increased and more efficient production from US oil rigs
  • The Canadian dollar benefited from a less cautious statement from the Bank of Canada yesterday; the Bank is embraced stronger domestic data while noting that the Canadian economy has largely adjusted to lower oil prices
  • Meeting minutes from the Federal Reserve’s May meeting showed that their overall assessment of the US economy has largely stayed the same; odds of a June rate hike now stand at 83.1% as the Fed indicate another rate hike will “soon be appropriate”
  • USD/CAD dropped initially after investors viewed the Fed's statement as somewhat dovish; oil prices and overall market sentiment are causing relative weakness for the loonie