Why Do Oil Prices Have Such A Big Impact On The Canadian Dollar?

Share this & earn $10
Financial Source
Published at : 24 Jan 2021
321 views
7
0

As an oil-dependent economy, Canada is very exposed to big fluctuations in Oil prices, but going into some of the details will help you understand why the impact is bigger than most traders realise.

----

We interpret and explain price moves in real-time, 24 hours a day. Our team of analysts produce text, video and audio commentary.

You understand the markets and trade with confidence. Learn more at our website here: https://financialsource.co

-----

Now, in the questions sections, we've had quite a couple of questions about oil prices and the reason why it's had such a big impact on the Canadian dollar, especially that most recent drop we saw a couple of weeks back.

The main reason for that strong correlation seen in the NWTI vs. CAD, now this is just an example of WTI in the blue, compared to the CAD YING chart. We can see that very strong correlation between the two. Now, the reason why we have such a strong correlation firstly is because Canada is a very oil dependent economy and we can see that crude petroleum is 14% of Canada's total exports.

Now, it's also very important to realize, or to note, that 98% of that is sent across the border to the United States. Now, why is that significant? It's significant because the US is also a very big oil producer themselves, but they produce a WTI, or West Texas Intermediate, and it is a much better quality oil, compared to the very sour and heavy oil seen in Canada which is called Western Canadian Select, or Canada crude oil.

Due to WTI having a much better quality, we normally see a Western Canadian Select oil trading at a very hefty discount, compared to WTI prices. Now, if we just take that into consideration in terms of actual prices right now, we can see WTI's trading at $21 a barrel, but Canadian crude is currently only trading at $4.50.

Now, to put that price into perspective, that means that a barrel of Canadian crude will cost you less than a McDonald's Big Mac meal and that means it costs more money at this stage to ship that oil than it does to buy that oil, which is a big negative for the Canadian oil producers, as well as the Canadian economy, which is why we usually see such a big reaction in the CAD when we have big fluctuations in oil prices.

So always keep in mind that WTI is trading at a certain level, Western Canadian Select or Canadian crude prices will always trade at a hefty discount, which means that drops in oil prices hurts Canada much more compared to the US in terms of the WTI price. And that's just something to keep in mind, why we normally see such a big reaction in the Canadian dollar when we see big fluctuations in oil prices.

-----

If you find this content helpful, you’ll love the Financial Source Terminal for live forex analysis and trade ideas.
There’s a link below were you can learn more about it:
https://financialsource.co
PricesImpactCanadian

⁴ᴷ⁶⁰ Walking During New York City's Major Snowstorm at 7 AM (December 17, 2020)

⁴ᴷ⁶⁰ Walking During New York City's Major Snowstorm at 7 AM (December 17, 2020)

12 Most Incredible Discovered Artifacts Scientists Still Can't Explain

12 Most Incredible Discovered Artifacts Scientists Still Can't Explain

MEP shames EU by holding up redacted document - 'They're in charge! They're in control'

MEP shames EU by holding up redacted document - 'They're in charge! They're in control'

Why black girls are targeted for punishment at school -- and how to change that | Monique W. Morris

Why black girls are targeted for punishment at school -- and how to change that | Monique W. Morris

I Don’t Wish Him Well | The Amber Ruffin Show

I Don’t Wish Him Well | The Amber Ruffin Show

MR for Firms (Perfect Competition)

MR for Firms (Perfect Competition)

Dancing Line - The Autumn (EXTENDED) by RainbowHerry

Dancing Line - The Autumn (EXTENDED) by RainbowHerry

How to make KNF Banana Vinegar as a substitute for KNF Brown Rice Vinegar + KNF FFJ Banana ■ VLOG #6

How to make KNF Banana Vinegar as a substitute for KNF Brown Rice Vinegar + KNF FFJ Banana ■ VLOG #6

Man That's Groovy - Jimmy Dorsey with Helen O'Connell 1943

Man That's Groovy - Jimmy Dorsey with Helen O'Connell 1943

Area Between Two Curves

Area Between Two Curves

How to Improve Your Small Business | Business Tips for Success | Business Improvement Ideas

How to Improve Your Small Business | Business Tips for Success | Business Improvement Ideas

WATCH OUT[REMIX] - THRE4T, BABY LOKO, JOEDY JOE, AND CAPONE

WATCH OUT[REMIX] - THRE4T, BABY LOKO, JOEDY JOE, AND CAPONE

MINECRAFT PARKOUR But It's FILLED With TROLLS! (Impossible)

MINECRAFT PARKOUR But It's FILLED With TROLLS! (Impossible)

How teeth cleaning is done ?? || DENTAL SCALING || FMS DENTAL HOSPITALS

How teeth cleaning is done ?? || DENTAL SCALING || FMS DENTAL HOSPITALS

DIY Iphone 12 Pro Max Notebook Organizer

DIY Iphone 12 Pro Max Notebook Organizer

WHEN YOU FEEL STRESSED - Motivational Video

WHEN YOU FEEL STRESSED - Motivational Video

Daxten feat. Wai, Revel Day - Can't Stay No Longer

Daxten feat. Wai, Revel Day - Can't Stay No Longer

This Secret Food Can Very Quickly Build Collagen In Your Skin- It's works

This Secret Food Can Very Quickly Build Collagen In Your Skin- It's works

Boxer2valve BMW Repair Manuals | Parts Catalogs | Owner's Manuals

Boxer2valve BMW Repair Manuals | Parts Catalogs | Owner's Manuals

Young Jeezy - Put On (Alvin And The Chipmunks)

Young Jeezy - Put On (Alvin And The Chipmunks)

The Power to Persuade | Doug Stevenson | Talks at Google

The Power to Persuade | Doug Stevenson | Talks at Google

System Of A Down - Question! live (HD/DVD Quality)

System Of A Down - Question! live (HD/DVD Quality)

Minecraft Bedwars but you can use any enchant you want...

Minecraft Bedwars but you can use any enchant you want...

REASONS BEHIND - No Dawn To Come (Official Video)

REASONS BEHIND - No Dawn To Come (Official Video)

Jake Cooper, Joey Busse - On Its Own

Jake Cooper, Joey Busse - On Its Own

Blondie - Words In My Mouth.

Blondie - Words In My Mouth.

Nonstop 80s Greatest Hits Best Oldies Songs Of 1980s Greatest 80s Music Hits

Nonstop 80s Greatest Hits Best Oldies Songs Of 1980s Greatest 80s Music Hits

What do I have to observe when lifting and lowering. | KRONE TV

What do I have to observe when lifting and lowering. | KRONE TV

Seventy Seven Entertainment Anthem

Seventy Seven Entertainment Anthem

Norman Rockwell - Case Of The Missing Inscription

Norman Rockwell - Case Of The Missing Inscription

Pink Floyd - Remember A Day

Pink Floyd - Remember A Day

5G and Network Slicing

5G and Network Slicing

Alida made grilled shrimp with scallion sauce with unique mayonnaise, the taste is so great!

Alida made grilled shrimp with scallion sauce with unique mayonnaise, the taste is so great!

5 reasons NEVER to date a Ukrainian Girl

5 reasons NEVER to date a Ukrainian Girl

All in One Vs Pondora - Reborn Of Earth 2021 Set

All in One Vs Pondora - Reborn Of Earth 2021 Set

You're not alone.

You're not alone.

Bob Dylan - I've Made Up My Mind to Give Myself to You (Official Audio)

Bob Dylan - I've Made Up My Mind to Give Myself to You (Official Audio)

COME ON A SHIPT SHOP WITH ME | SHIPT SHOPPER

COME ON A SHIPT SHOP WITH ME | SHIPT SHOPPER

Two softer cerumens and one particularly hard cerumen

Two softer cerumens and one particularly hard cerumen

$10,000 DOUBLE DOWN WITH LIVE DEALER!

$10,000 DOUBLE DOWN WITH LIVE DEALER!

Enterprise Car Share Marketing Case Competition #5

Enterprise Car Share Marketing Case Competition #5

5 signs that He is wasting your time - Marriage is a continuation of dating problems | Joe Wisdom

5 signs that He is wasting your time - Marriage is a continuation of dating problems | Joe Wisdom

WACC, Cost of Equity, and Cost of Debt in a DCF

WACC, Cost of Equity, and Cost of Debt in a DCF

Roth IRA Contribution Limits for 2020 and 2021

Roth IRA Contribution Limits for 2020 and 2021

Minecraft NOOB vs PRO vs HACKER: MODERN SKYSCRAPER HOTEL - HOUSE BUILD CHALLENGE in Minecraft

Minecraft NOOB vs PRO vs HACKER: MODERN SKYSCRAPER HOTEL - HOUSE BUILD CHALLENGE in Minecraft

Important Information: Hear What FG Have Just Stated That It Will Do To Domant Accounts Of Nigerians

Important Information: Hear What FG Have Just Stated That It Will Do To Domant Accounts Of Nigerians

Daktronics LED Video Display: Minnesota Twins

Daktronics LED Video Display: Minnesota Twins

Lost Frequencies vs. Love Harder feat. Flynn - You (Deluxe Mix)

Lost Frequencies vs. Love Harder feat. Flynn - You (Deluxe Mix)

MUAY THAI TRAINING CAMP THAILAND |  6 WEEK  BODY TRANSFORMATION

MUAY THAI TRAINING CAMP THAILAND | 6 WEEK BODY TRANSFORMATION