It was another volatile week in the energy market, which resulted in decreases of 4% and 5% for WTI and Brent oil. The increased production of OPEC countries recorded in the last month explains some of the decline.
- According to recent analyst estimates, production of OPEC members was up 800,000 barrels per day over the last month. The small increase in Saudi production suggests a possible price war between the major producing countries of OPEC. The next OPEC meeting will be held in seven weeks and some anticipate that Saudi Arabia wants to reduce prices in order to have support from other member countries for a possible reduction in quotas. In June 2012, Crude Oil prices had experienced a similar correction and Saudi Arabia intervened massively by reducing its production by 10%. This helped to drive up the price of Brent crude by 30% in less than 2 months.
- The effect of this recent decline is more evident for our neighbors south of the border. From the high reached on April 28th, the price of gasoline fell by 9% in the United States and only 3% in Canada. Obviously, the strength of the American dollar explained the disparity. Last week has again been difficult for the USD/CAD which is trading just below the peak of 1.1244 recorded on March 20th. The trend is clearly downward for the dollar and a move near 1.15 by the end of the year should be considered. Have a good week! Emmanuel Tessier-Fleury