Oil is up 1.5% on the day but will end the year lower for the first time since 2015
Oil’s rise higher today is helping to give the loonie an added boost as well with USD/CAD lingering near session lows at 1.3613 at the moment. The loonie is the second-best performing major currency today.
Despite the move higher in oil since hitting a low of $42.53 last week, the commodity is set for its first yearly decline since 2015 after dropping by ~40% from its peak in mid-October. On the year, WTI crude is down by a whopping 23.8% at this current point in time.
The major story for oil next year will be the issue of oversupply versus production cuts by OPEC+ nations. The latter has continued to give reassurances to markets that they will be cutting significantly to ensure that the market won’t be flooded with overwhelming supply but so far it just isn’t doing the trick.
The wildcard remains the Iran sanctions issue as so far US sanctions on Iran’s oil exports/production are having a limited impact and that’s not helping to alleviate the downwards pressure on oil prices.
From a technical perspective, the June 2017 low @ 42.05 is a significant support level before price retests the $40 psychological barrier. A break below that would represent yet another slippery slope as there isn’t much support levels to pick out a bottom for oil between the $30 and $40 handles.
Just for some background information as we get into the new trading year, price hit a low of $26.05 in November 2016 and that was the lowest oil has traded since 2003. If OPEC+ measures aren’t gonna cut it, that could potentially be a level of interest in due time.