Recent hikes in oil prices have been good for the Loonie and any Currency Exchange that relies on it, as the Canadian Dollar experienced a 10% jump. This happened following the spike in the prices of oil brought about by the recent drone attack on an oil facility in Saudi Arabia.
The Abqaiq processing facility, as well as the Khurais oilfield in Saudi Arabia was recently attacked by drones in the second weekend of September, which led to fires that led to 5.7mn barrels of oil to be sidelined instead of being pumped by Saudi Aramco.
Saudi Aramco CEO Amin Hassan Al-Nasser reported that the attack resulted in no injuries or casualties, but it did take several days following the incident to restore production levels to normal, which amounts to a considerable amount of the world’s supply, about 6%.
The US has been using its strategic reserves to account for any supply deficits, but RBC Capitals Market Commodity Strategist Michael Tran says that the market will be still be affected, with future price action determined by how the metaphorical wounded bulls return, as the short interest in WTI has been fairly low and assigned to the sidelines since the start of the summer, due to the increased drone strikes and tanker seizures.
CIBC Capital Markets Head of FX Strategy Bipan Rai says that the US dollar and the Loonie, given that current conditions hold, will stay above the targeted numbers for entry into new positions, around the 1.3050/75 area. He notes that if, and only if, the USD/CAD dropped below that, then their strategic long USD/CAD is off the mark.
The USD/CAD Currency Exchange rate on the Monday following the incident was 0.17% lower than what was expected, having dropped to 1.3207 overnight thanks to the Loonie spiking in value. As for the Pound-to-Canadian-Dollar rate, it quoted at 1.6536, before dropping to 1.6440 overnight, putting it down 4.97% for 2019.
This is good for any company that handles Canadian Currency Exchange, as it means that the Loonie continues its performance as 2019’s best performing major currency.
Scotia bank Chief FX Strategist Shaun Osborne says that the outlook for the CAD is still good, favoring reduced short-term weakness, but recent events may force the market to settle into a range soon.