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WTI slides below $83.00 amid demand concerns, supply disruption fears to limit losses
West Texas Intermediate (WTI) US crude Oil prices kick off the new week on a weaker note and slide below the $83.00/barrel mark during the Asian session.
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EUR/USD retreats below 1.0700 as USD rebounds
EUR/USD lost its traction and retreated slightly below 1.0700 in the American session, erasing its daily gains in the process. Following a bearish opening, the US Dollar holds its ground and limits the pair's upside ahead of the Fed policy meeting later this week.
GBP/USD holds positive ground above 1.2500 on weaker US Dollar, Fed rate decision looms
The GBP/USD pair holds positive ground near 1.2520 on Monday during the early Asian session. The uptick of the major pair is supported by the softer US Dollar below the 106.00 psychological mark. Investors will closely monitor the Federal Open Market Committee interest rate decision and Press Conference on Wednesday.
USD/JPY recovers toward 157.00 following suspected intervention
USD/JPY recovers ground and trades above 156.50 after sliding to 154.50 on what seemed like a Japanese FX intervention. Later this week, the Federal Reserve's policy decisions and US employment data could trigger the next big action.
Gold holds steady above $2,330 to start the week
Gold fluctuates in a relatively tight channel above $2,330 on Monday. The benchmark 10-year US Treasury bond yield corrects lower and helps XAU/USD limit its losses ahead of this week's key Fed policy meeting.
WTI slides below $83.00 amid demand concerns, supply disruption fears to limit losses
West Texas Intermediate (WTI) US crude Oil prices kick off the new week on a weaker note and slide below the $83.00/barrel mark during the Asian session.
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Oil Highlights
Crude oil is classified into various grades according to density (heavy vs light) and sulphur content (sour vs sweet). The lighter and sweeter the crude, the higher the price it can be sold, because refiners can produce higher yield of high quality refined products from it.
Density is measured by API gravity, a measure developed to compare the density of petroleum with water (API > 10 means the liquid floats on water) but is now widely used to compare among crude oils. API degree is inversely related to the density of crude oil. In general, crudes of API between 40-45 degrees can be sold at greatest commercial values.
Sulphur content determines the quality of a crude oil. This corrosive material decreases the purity of a crude oil. Therefore, a crude oil with high sulphur content (sour crude) should sell cheaper than one with low sulphur content (sweet crude). There are two main benchmarks for pricing Crude Oil: WTI (West Texas Intermediate) from USA and Brent from UK.
Major benchmarks
West Texas Intermediate (WTI) crude oil is of very high quality. It has API gravity of 39.6 and sulphur content of 0.24% only. Its low density and low sulphur content gave it the name 'light, sweet crude' and enabled refiners to produce high yield of gasoline. Most WTI crude oil gets refined in the Midwest region of the country, with some more refined within the Gulf Coast region.
This type of crude oil is used as a benchmark in oil pricing and the underlying commodity of NYMEX's oil futures contracts. Due to its 'lightness' and 'sweetness', WTI crude is normally selling at about $1-$2/ barrel premium to Brent.
Brent is actually a blend of crude oil from 15 different oil fields the North Sea. It has API gravity of 38.3 degrees and sulphur content of around 0.37%. From these 2 parameters, we can see that Brent crude oil is heavier and less sweet than WTI crude. Brent is suitable for refinery of gasoline and middle distillates.
Brent was first traded on International Petroleum Exchange in London and then on Intercontinental Exchange (ICE) since 2005. Typically, price of Brent crude oil is around $1 lower than WTI. However, in 2007, due to the depletion of the North Sea Oil field, Brent Crude futures had traded at a premium to WTI of approximately $1 to $3 per barrel.
Oil and USD/CAD Correlation
Some of you may already be familiar with the special relationship between oil prices and the Canadian dollar. For those of you who aren't, let me fill you in on what you're missing!
There's a reason why Canadian dollar traders keep track of oil prices-- the two often move hand in hand. When oil prices move down, it's not uncommon to see the Loonie follow suit. Conversely, rising oil prices are usually accompanied by Loonie rallies. Why do these two share such a strong bond? It has a lot to do with Canada's economy.
Canada happens to be the world's seventh largest oil producer. In fact, it's the U.S.'s main supplier, as it sends about 2 million barrels of oil a day to its southern neighbor. Since Canadian dollars are needed to purchase and move oil across the border, the demand for oil tends to have a direct impact on USD/CAD price action.
It's interesting to see that aside from risk sentiment and fundamentals, oil also plays a big factor in Loonie price action. So the next time you think of trading USD/CAD, do yourself a big favor and take a peek at your oil charts. It could just give you critical insight to help you bag some Loonie pips!
Other important group of influent pairs includes: EUR/USD, GBP/USD, USD/JPY, AUD/USD, USD/CHF and NZD/USD.