After a five-week period of consolidation, energy prices finally broke through the upper bound of their trading range. Oil left a range of US$43 to US$48, even rising close to US$51/barrel. The price of a barrel of WTI, in US dollars, jumped significantly, up over 8% on the week.
- Last week Saudi Arabia announced spending cuts in response to the current low oil prices, which are seriously affecting the government’s ability to balance its budget. The Saudi Minister of Finance said that the government will not be starting any new projects and will freeze all appointments and promotions in the last quarter of 2015. It should be noted that income from oil accounts for 90% of Saudi Arabia’s revenue.
- In a press release, Goldman Sachs (N:GS) said that oil’s recent rally was mainly due to a broader re-risking across assets after the recent release of poor U.S. employment figures. Note that since the figures were released, the market has concluded that the U.S. Federal Reserve will not be raising interest rates. Furthermore, Goldman Sachs believes that the price rise has been exacerbated by large short positioning on oil and the break of key technical levels.
- Returns on energy prices in U.S. dollars posted their best week of the year. This was clearly good for our loonie, which appreciating almost 2% in five days. The price of diesel in Canadian dollars rose by almost $0.02/liter on the week. We would also like to remind those clients who are willing to wait to lock in fuel supplies at attractive prices that orders can be left in the market
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