Weekly Energy
The National Bank of Canada | May 03, 2016 05:33AM ET
Last week saw WTI increase by 5% and Brent by 6%, ending oil’s best month in 7 years. Both benchmarks soared 20% in April, and have gained 75% since their lows in January. WTI traded above 45 USD/bbl. for the first time since November, and closed the week at 46 USD/bbl. (and Brent at 48 USD/bbl.).
Much of crude’s strength this week was attributed to the Federal Reserve’s decision on Wednesday to not increase its benchmark interest rate. This caused a depreciation of the USD, which tends to increase oil prices. The Fed highlighted sluggish U.S. economic growth as a major concern, and concluded that strong employment and consumption data did not justify raising rates. Janet Yellen and her fellow Fed members were vindicated on Thursday, when 4th quarter American GDP was reported under expectations (forecast: 0.7%; actual: 0.5%). The Fed is likely to avoid increasing interest rates as long as American economic data continues to disappoint, which could keep the USD weak and support an elevated price of oil.
On Friday, Bloomberg reported that OPEC production increased to 33.217 million barrels per day, up from 32.733 million bpd at the end of March. 60% of this increase came from Iran, which has been aiming to boost output ever since economic sanctions against the country were lifted. Because analysts all expected to see aggressive Iranian production growth, this news had a minimal effect on the price of crude. The effect was also subdued thanks to the fact that American production fell by 70,000 barrels per day in April.
Turning to refined products: New York diesel gained 6%, while gasoline increased by 4%. The Fed’s inaction and weak American GDP helped the loonie appreciate by 1%. This currency effect reduced the impact of price increase on Canadian consumers, with diesel and gasoline increasing by 4% and 2.5%, respectively. Although diesel is currently trading at 0.46 CAD/L, 36% above its low in January, it is still 0.18 CAD/L cheaper than it was a year ago.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.