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WTI consolidates below mid-$72.00s; seems poised to register gains for the first time in five weeks
West Texas Intermediate US Crude Oil prices oscillate in a narrow trading range band during the Asian session on Friday and consolidate gains registered over the past four days. The commodity currently trades around the $72.40 region, below a one-week high touched on Thursday
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EUR/USD recovers toward 1.0500 after mixed US PMI data
EUR/USD rebounds toward 1.0500 in the American session on Friday after the data from the US showed that the business activity in the private sector expanded at a softer pace than anticipated in early February. The pair remains on track to end the week with little changed.
GBP/USD rises above 1.2650, looks to post weekly gains
GBP/USD regains its traction and trades above 1.2650 in the second half of the day on Friday. The data from the US showed that the S&P Global Services PMI dropped into the contraction territory below 50 in February, causing the US Dollar to lose strength and helping the pair edge higher.
USD/JPY stalls the bounce below 150.50 after BoJ Ueda's speech
USD/JPY is stalling the rebound below 150.50 in the Asian session on Friday. Japan's core CPI rose to a 19-month high in January, reaffirming bets that the BoJ will continue to raise interest rates, underpin the Japanese Yen alongside BoJ Ueda's hawkish comments.
Gold holds above $2,930 as US yields edge lower
Gold holds above $2,930 after correcting from the record-high it set above $2,950 on Thursday. Following the mixed PMI data from the US, the benchmark 10-year US Treasury bond yield stays in negative territory below 4.5% and allows XAU/USD to hold its ground.
WTI consolidates below mid-$72.00s; seems poised to register gains for the first time in five weeks
West Texas Intermediate US Crude Oil prices oscillate in a narrow trading range band during the Asian session on Friday and consolidate gains registered over the past four days. The commodity currently trades around the $72.40 region, below a one-week high touched on Thursday
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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.