Last week has been very volatile while investors were waiting for the final results of the Brexit vote on Thursday in the United Kingdom. WTI traded above USD 50/barrel in the middle of the week, before dropping below USD 48/barrel on Friday after the vote and ending the week relatively flat. Crude oil Brent followed the same pattern but was hurt a little bit more by the vote and ended the week down almost 2%.
In a surprising upturn, Britain voted in favor of Brexit at 51.9% on Thursday night, choosing to leave the EU and prompting widespread market turmoil overnight. The flight to safety pushed the U.S. dollar up by about 350 points against the CAD and about 300 points against the EUR. Crude oil took a hit and immediately dropped by 7% for WTI and Brent on the news. Volatility should remain high this week as investors continue to digest the news.
The Canadian Association of Petroleum Producers released its annual forecast in which it said that total Canadian oil output would drop to 3.82 million barrels a day in 2016, less than the 3.85 million barrels produced last year. This would be the first decline since 2009 as the wildfire in Alberta curtailed more than 1 million barrels a day for a month and low oil prices continue to hit producers.
Due to the strengthening of the U.S. currency, diesel was relatively flat for the week at 0.50 CAD/liter and gas gained more than 2% or more than 1 cent to end the week around 0.53 CAD/liter. As energy prices pull back because of the Brexit, we may approach interesting levels to establish new hedges for your purchases of fuel.
