Advertisement
Advertisement

USD/CAD and Crude Oil- How Would They Be Affected by the Latest Events in Iran?

By:
FX Empire Editorial Board
Published: Jan 18, 2016, 16:48 GMT+00:00

With the lifting of sanctions, Iran would be able to export as much crude oil to the world as it can, or as much as it can find demand for. Before

USD/CAD and Crude Oil- How Would They Be Affected by the Latest Events in Iran?

With the lifting of sanctions, Iran would be able to export as much crude oil to the world as it can, or as much as it can find demand for. Before imposing an oil embargo on Iran in 2012, one in every five barrels of Iranian crude went to European refineries. Iran have been selling just over one million barrels a day for the past few years, mostly to China, India, Japan and South Korea.

Iran says it will hike sales by 500,000 barrels the day after sanctions are lifted and increase total exports to around 2.5 million barrels within the next year. This will push the price only to one direction: downwards. The market is already flooded by cheap oil and there will be many more barrels in the market than there are buyers.

In order to win back its customers, Iran plans to offer discounts on prices that are already the lowest in 11 years. Iran’s full return to the market could trigger a price war with its arch-rival Saudi Arabia, which is trying to keep its own market share by selling under the market price.

Rather than causing an economic crisis, the worst of the oil price slump may already be over. The depressant effects of falling commodity prices hit hard and fast. Their positive impact almost always takes longer to trickle through the economy. We may now be seeing that inflection point in the West.

USD/CAD and Crude Oil- How Would They Be Affected by the Latest Events in Iran?
USD/CAD and Crude Oil- How Would They Be Affected by the Latest Events in Iran?

According to eia: “suggesting that the market expects WTI prices to range from $25/b to $56/b (at the 95% confidence interval).”

2

3

Now let’s have a look at the oil industry:

The Baker Hughes Rig Counts are an important business barometer for the drilling industry and its suppliers. When drilling rigs are active they consume products and services produced by the oil service industry. The active rig count acts as a leading indicator of demand for products used in drilling, completing, producing and processing hydrocarbons.

I have looked into two major prices impacts: on 1998 and 2009.

Those years show significant low prices for oil, in 1998 the lowest price was 16$ and in 2009 the lowest price was 33$, now let’s put those prices with Rig Counts data

* this data is taken from bakerhughes.com

1998

1998

Latin America

Europe

Africa

Middle East

Asia Pacific

Total Intl.

Canada

U.S.

Total World

Jan

276

109

82

165

187

819

481

993

2293

Feb

269

114

81

165

180

809

507

974

2290

Mar

271

102

82

165

186

806

390

932

2128

Apr

266

105

83

169

182

805

128

886

1819

May

258

98

86

169

187

798

157

855

1810

Jun

260

107

79

164

180

790

238

854

1882

Jul

241

86

68

171

165

731

217

816

1764

Aug

227

91

67

169

168

722

211

792

1725

Sep

219

108

61

170

174

732

187

774

1693

Oct

209

91

67

160

159

686

153

734

1573

Nov

212

87

68

164

158

689

201

688

1578

Dec

213

85

62

160

151

671

248

647

1566

Avg.

243

99

74

166

173

755

260

829

1843

 

2009

2009

Latin America

Europe

Africa

Middle East

Asia Pacific

Total Intl.

Canada

U.S.

Total World

Jan

381

93

58

274

238

1044

377

1553

2974

Feb

374

81

59

264

242

1020

413

1320

2753

Mar

358

95

61

262

236

1012

196

1105

2313

Apr

349

86

62

253

236

986

74

995

2055

May

357

82

62

253

239

993

72

918

1983

Jun

343

77

64

247

236

967

125

895

1987

Jul

351

73

57

249

244

974

175

931

2080

Aug

344

78

58

234

233

947

178

980

2105

Sep

355

83

57

245

246

986

208

1009

2203

Oct

351

84

62

239

247

983

244

1044

2271

Nov

361

86

68

253

257

1025

277

1107

2409

Dec

353

84

70

251

266

1024

313

1172

2509

Avg.

356

84

62

252

243

997

221

1086

2304

 

What would be now in 2016?

From the last count on the 15th of January we can see something interesting and this is related also to usd/cad price:

4

From the technical side:

Let’s test the Canadian dollar compatibility, we will see oil prices within the past weeks when the currency follows strong moves by the expectation. At the moment I expect for radical moves don’t surprised if the amendment to the level of 1.24 + _ equivalent to the level of 51-4 oil prices.

If oil will move more than that we need to expect even stronger repair more at the level of 1.19 + _”. Another leg up in the usd/cad will lead to 1.46+_ or 1.48-90 (With an option to continue the level from 1.54 to 55). The 1.46-1.48 Area hand by hand with crude oil to 26-28 prices. Oil chart is in Type of building wedge, it could leading to prices corrections over 50$. Another thing that watched in Canadian dollars charts. Now, remains to be seen whether this time too it will come…… If it would, then I predict targets, 1.24-1.19 in usd/cad area with oil prices in 51-55.

 

5
6

But when the news are the worst ….. Is it the time to buy, or maybe it’s the time to sell?

About the Author

FX Empire editorial team consists of professional analysts with a combined experience of over 45 years in the financial markets, spanning various fields including the equity, forex, commodities, futures and cryptocurrencies markets.

Did you find this article useful?

Advertisement