The Canadian dollar strengthened against the US dollar and the British pound on Wednesday, as oil prices climbed after a decline in US inventories improved the outlook for global supply. Tradersâ concerns about trade relations between the United States and its northern neighbor eased today, which further supported the loonie.
The US Energy Information Administration released a summary of weekly petroleum data for the week ended May 5 at 14:30 GMT today, which revealed a drop of 5.247 million barrels in US inventories over the week. The drop compared to a decline of 0.930 million barrels the week before and far exceeded analyst forecast of a drop of 1.786 million barrels.
The weekly report added that output from US crude oil refineries dropped 418,000 barrels per day during the same week, while crude oil imports were 644,000 barrels lower per day when compared to the week before. Prices of crude oil had come under pressure from returning Libyan production and higher output in the United States.
The data closely matched numbers released by the American Petroleum Institute yesterday. The institute said that US crude oil inventories fell 5.8 million barrels last week, which was far higher than estimates of a 1.8 million barrel decline. Oil prices recovered some of their recent losses following the two releases as worries of a global oversupply eased.
However, anticipation of high US production in 2017 limited gains of the Canadian dollar today. The Energy Information Administration forecasted on Tuesday that US output will be 9.31 million barrels per day in the current year and 9.96 million barrels a day in 2018, which is 1% and 0.6% higher than previous estimates, respectively. Prices of crude oil, one of Canadaâs largest exports, are closely tied with the Canadian currency.
It remains to be seen if the Organization of the Petroleum Exporting Countries and other major oil producers will decide to extend an agreement to limit crude production farther than June.
USD/CAD rose to 1.3672 18:50 GMT on Wednesday from 1.3648 at 17:20 GMT, the pairâs weakest level since May 8. USD/CAD began trading today at 1.3709. GBP/CAD traded at 1.7688 after touching 1.7649 at 16:10 GMT, a level last seen on May 4. GBP/CAD was at 1.7748 when the day started.
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