The pressure is still off the energy market as the price of WTI crude oil fell for a fourth consecutive week. We believe that it is important for our clients to continue to be patient in such an environment, but the situation is in their favour since their fuel expenses are falling, even though they may have implemented hedges at higher levels on at least part of their consumption.
- There is still considerable disagreement among the member countries of OPEC. Even though Libya has openly suggested that other members should scale back production, Kuwait and other countries maintain that the drop in oil prices does not yet justify immediate action by the organization. OPEC will hold its next meeting of member countries on November 27, and investors are afraid that there will be disagreements over production quotas.
- The current abundance of oil is good for China, which can buy at very attractive prices as the world's main producers cut their prices to defend market shares. China is the world's second largest buyer of oil, and it is consuming at record levels. For September, its oil imports were up 7.8% compared to the same period last year. The growing demand in China means that it will need an additional 20% refining capacity by 2020. According to the International Energy Agency, Asia accounts for 80% of the growth in global demand.
The decline of the Canadian dollar continues to influence fuel prices in Canada. Over the last year, the US Dollar has gained ground against most of the world's main currencies. It is up 7.1% against the Canadian dollar and 8.3% against the euro. Since the world's crude oil prices are denominated in U.S. dollars, the greenback's strength favours oil producing businesses.
Have a great week!