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Oil sinks while the Greenback retreats on softer CPI print
Oil breaks below $78.00 after both OPEC and IEA released their monthly reports. While OPEC stuck to previous expectations, sluggish demand is forecasted in the IEA release. The US Dollar Index eases ahead of the US CPI print.
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EUR/USD reaches for 1.0900, easing US CPI inflation pummels Greenback
EUR/USD climbed on Wednesday in one of the pair’s single-best days of 2024, climbing towards 1.0900 and on pace to etch in a fourth consecutive gain week. Broad-market selling pressure deflated the US Dollar after risk appetite roared to the forefront after US CPI inflation eased more than investors expected.
GBP/USD extends its upside above 1.2680 on weaker US Dollar
The GBP/USD pair extends its upside near 1.2688 on Thursday during the early Asian session. The uptick of the major pair is supported by the weaker Greenback after the release of softer US CPI inflation data.
USD/JPY slips back to 155.00 as Greenback weakens following soft US CPI inflation
The USD/JPY pair trades in positive territory for the fourth consecutive day near 156.55 on Wednesday during the Asian session. The uptick of the pair is bolstered by the speculation that the Federal Reserve might maintain rates higher for longer amid the elevated inflation.
Gold rally continues with buyers eyeing $2,400 as inflation recedes
Gold price extended its uptrend for the second straight day on Wednesday and hit a three-week high of $2,390 after data revealed by the US Bureau of Labor Statistics showed inflation is ebbing, increasing the odds for a Federal Reserve rate cut in 2024.
Oil sinks while the Greenback retreats on softer CPI print
Oil breaks below $78.00 after both OPEC and IEA released their monthly reports. While OPEC stuck to previous expectations, sluggish demand is forecasted in the IEA release. The US Dollar Index eases ahead of the US CPI print.
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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.