Canadian dollar at 80 cents, oil at $51 after Yemen air strikes
Fear that oil shipments to Europe might be disrupted boosts price of crude
The Canadian dollar bounced above 80 cents as oil soared on news of Saudi air strikes on Yemen.
The loonie was trading at 80.18 at the close. It has trended mostly below 80 cents since the end of January as oil prices dropped.
But crude has had strong gains for the past two days. The West Texas Intermediate contract, traded in New York, was up $2.12 at $51.33 U.S. a barrel, off its week-ago lows of $44 a barrel. WTI is still down 3.6 per cent on the year.
Brent, the most commonly traded international contract, was up $2.59 at $50.07 a barrel. That's a gain of 4.3 per cent today and above its level at the beginning of the year.
Western Canada Select, a Canadian contract that sank below $30 last week, is up $2.42 today alone at $38.63.
Turmoil might reduce oil supply
Traders were betting that further turmoil in the Middle East will stall tanker traffic from the area and there were fears that Iran would be drawn into the conflict.
Yemen is on an important tanker route and Saudi Arabia is the region’s biggest oil exporter.
Saudi Arabia and its allies launched air strikes in an effort to oust Shiite rebels, who have forced Yemen’s president to flee.
There is a danger the country is sliding towards civil war after Houthi rebels receiving support from Iran marched on the southern Yemeni port city of Aden.
The conflict weighed heavier on Brent crude, because oil exports to Europe pass through the narrow Red Sea strait between the port of Aden and Djibouti.
"As we go on here, there’s probably going to be a little bit of risk premium put to crude for unrest in the Middle East," Dirk Lever of Altacorp told CBC News.
That premium got knocked back by the world oil glut, he said.
"In the past we’ve seen $15 to $20 and recently that got wiped out so in the next little while we’ll see a bit of premium built into the price of crude," he added.
Still a glut close to home
North America still has a huge glut of oil, built up in part by the boom in U.S. shale production, but also a projected increase in oilsands production, even in the face of lower prices.
Yesterday a report from the Conference Board of Canada pointed out that both oilsands and shale production are set to increase, making a return to $100 oil unlikely.
This week Canadian oilsands producers announced maintenance schedules on their upgraders that could reduce supply by 10 per cent, at least temporarily.
Royal Dutch Shell, Suncor Energy Inc., and Canadian Oil Sands Ltd. have all scheduled maintenance for this spring on upgraders, which convert mined bitumen into refinery-ready synthetic crude.
The air strikes helped drive down European stocks and North America followed.
Toronto stocks were down at mid-afternoon, dropping 59 points at 14,869.
Broad pessimism about economic growth dragged down stocks in Toronto, with banks, insurers and railways among those affected.
TD Bank downgraded its estimated for Canadian GDP growth yesterday and today Bank of Canada governor Stephen Poloz acknowledged first quarter growth would be lacklustre.
The Dow fell 40 points at 17,678 and the S&P 500 was down five points at 2056.
With files from the Associated Press