Oil NEWS
Crude Oil goes nowhere with trading volumes already at lower levels
Oil prices are slipping lower by less than 0.50%, reversing after a positive Asian session earlier. Markets are roughly range trading in search of levels while final US data makes its way. The US Dollar Index has a fresh two-year high in reach after upbeat Durable Goods revisions.
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EUR/USD struggles to hold above 1.0400 as mood sours
EUR/USD stays on the back foot and trades near 1.0400 following the earlier recovery attempt. The holiday mood kicked in, keeping action limited across the FX board, while a cautious risk mood helped the US Dollar hold its ground and forced the pair to stretch lower.
GBP/USD set to swoon on holiday-shortened week
GBP/USD waffled near the 1.2550 level on Monday, kicking off the holiday trading week with a third of a percent decline as market sentiment coils. Market volumes are set to drain out of global exchanges as investors broadly hang up their hats for the Christmas holiday, and global markets will be shuttered on Wednesday.
Japanese Yen retains intraday negative bias amid doubts over BoJ's rate-hike plan
The Japanese Yen struggles to capitalize on Friday’s modest recovery gains against the US Dollar. Doubts over BoJ’s rate hike plan and elevated US bond yields weigh on the lower-yielding JPY. Traders now look to the US Consumer Confidence Index for short-term impetus later this Monday.
Gold flat lines above $2,600 ahead of holiday trading week
Gold price trades flat around $2,610 during the early Asian session on Tuesday. Markets face a relatively quiet trading session ahead of the holiday trading week. The US Richmond Fed Manufacturing Index for December is due later on Tuesday.
Crude Oil goes nowhere with trading volumes already at lower levels
Oil prices are slipping lower by less than 0.50%, reversing after a positive Asian session earlier. Markets are roughly range trading in search of levels while final US data makes its way. The US Dollar Index has a fresh two-year high in reach after upbeat Durable Goods revisions.
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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.