Oil Plunges Below $60 a Barrel

On 10^th December, the 12-member OPEC group predicted that the demand for crude oil will drop next year by about 300,000 barrels a day to 28.9 million, the least since 2003.

 

That sentence caused Brent futures to slide as much as 2.5 percent in London, coming close to $60 a barrel. Brent for January settlement declined as much as $1.57 to $60.28 a barrel on the London-based ICE Futures Europe exchange and was at $61.16 at 12:30pm Sydney time. The more active February future was 71 cents lower at $61.44.

 

US oil fell to $56 a barrel on Monday morning, extending its decline from the lowest level in more than five years. The United Arab Emirates has said that OPEC will resist output cuts even if prices slump as low as $40.

 

West Texas Intermediate for January delivery dropped as much as 2.7 percent, to $56.25 a barrel in electronic trading on the New York Mercantile Exchange. The contract decreased $2.14 to $57.81 last Friday, the lowest since May 2009. Prices are down 42 percent this year.

 

In the interim, the International Energy Agency has reduced its 2015 demand forecast for the fourth time in five months amid rising supply from non-OPEC countries. Oil has lost more than 20 percent since OPEC decided at a meeting in Vienna last month to maintain its production target, resisting calls from members including Venezuela to cut output.

 

Drillers in the US, pumping crude at the highest rate in more than three decades, idled the most rigs in almost two years as prices sank further.

 

OPEC, which supplies about 40 percent of the world’s oil, pumped 30.56 million barrels a day in November, exceeding its target for a sixth straight month, a Bloomberg survey showed.

 

Along with oil, prices of iron ore has been one of the hardest hit as well. The price of the material used to make steel has almost halved this year and slumped to a five-year low of USD68.49 a ton last month.

 

Australia has estimated that iron ore will trade at about USD60 a metric ton as the largest mining companies press on with expanding supply, deepening a glut just as demand growth in China falters.

Iron ore currently accounts for about 20 percent of Australia’s export income, and government revenue is expected to be A$7 billion lower this fiscal year due to the sharp drop in commodity prices. The Australian dollar has fallen more than 10 percent since the start of September as the price of the steel-making material declined.

Top News This Week

Europe: German Flash Manufacturing PMI. Tuesday, 16^th December, 4.30pm.              
I expect figures to come in above 50.1 (previous figure was 49.5).

UK: CPI y/y. Tuesday, 16^th December, 5.30pm.              
I expect figures to come in at 1.5% (previous figure was 1.6%).

Canada: Manufacturing Sales m/m. Tuesday, 16^th December, 9.30pm.              
I expect figures to come in at -0.3% (previous figure was 2.1%).

Trade Call

Long USD/CAD at 1.1538

On the H1 chart, prices on USD/CAD have failed to rally to a higher high, signaling a pause in the upward momentum. I expect prices to retrace another 30-40 pips downwards as traders take profit on slumping oil prices.

 

With the negative data expected to come out from Canada this week, I expect the uptrend on USD/CAD to continue. An entry is taken at 1.1538 at the support level. A stop loss of 35 pips is placed below the previous low and we will have two targets on this trade, exiting the first position at 1.1573 and the second one at 1.1608.

 

Entry Price = 1.1538
Stop Loss = 1.1503
1st Profit = 1.1573
2nd Profit = 1.1608

 

Sources: (As written on BTInvest, 15 December 2014.)

 

Note: The information in this article has been obtained from sources believed to be reliable. Its accuracy or completeness is not guaranteed and opinions are subject to change without notice. This article is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this information.