The bottom of the barrel can always be deeper. After it seemed that WTI Crude Oil stabilized between $32 and $33, a further drop sent it below $31. At the time of writing, the low is $30.86, but this may only be temporary.
For USD/CAD, the new high is 1.4245. The pair is above the August 2003 high and is at levels last seen in May 2003. Yes, that’s nearly 3 years away. At that time, the US-led coalition was taking over Iraq in the Second Gulf War that began in March that year. Here are three reasons for the most recent crash in crude, which is directly affecting CAD:
Here is the USD/CAD chart:
1 – No news is good news
It may be also events in the Middle East or lack thereof that lead to this most recent fresh fall. After headlines about Iran and Saudi Arabia dominated the headlines last week, today we have nothing of importance. No news is bad news for oil prices, as the basic economics point to too much supply and not enough demand.
2 – Iran sanctions close to being lifted
Eventually, lower oil prices will lift demand and will also limit supply. But so far, inventories are just filling up and the sanctions over Iranian exports are expected to be lifted any day now. Today we heard from the Federica Mogherini of the EU. She said the day is close and that the implementation of the deal is going on as expected.
Iran has already said that it is ready to pump out oil immediately, with clients already waiting.
3 – Morgan Stanley joining the $20 Camp
The prices of oil is forecast to drop to $20 according to Morgan Stanley. This statement also adds to the pressure. While it seems that analysts are competing on headlines about how low oil can go, this has an impact. Eventually, if everybody is short, there’s no one left to sell, but before we get a short squeeze, it’s just a short.
Here is the chart of WTI Crude Oil. Brent is not far behind, and so are other oil measures.
