Improvement Forecast for Oil Price, NOK & CAD in Second Half of 2016

January 21, 2016 - Written by David Woodsmith

STORY LINK Improvement Forecast for Oil Price, NOK & CAD in Second Half of 2016

Tanking oil Prices Causing NOK and CAD to Decline

Calm has broken out in the global financial markets today following yesterday’s turmoil. The lurch lower for wholesale oil prices sent equities markets into a tail spin on the day and the closely-monitored VIX ‘Fear Index’ spiked to its highest level since last August as a result, touching 32.09 during the middle part of the trading day before edging slightly lower ahead of last night’s New York closing bell.

The driver for the febrile mood amongst investors was clear – the lifting of economic sanctions against one-time pariah nation Iran by the international community means that the Persian state is now free to sell between 500,000 to 1m barrels of crude oil per day on the international markets.

With many analysts suggesting that the global market is already experiencing a heavy over-supply of ‘Black Gold’, the weekend news sent the price of oil sharply lower. The assertion on Tuesday from the International Energy Agency (IEA) that the global oil market could ‘drown in oversupply’ triggered all-out panic amongst investors and the fall-out saw equities markets and the oil-driven Norwegian Krone (currency : NOK) and Canadian Dollar (currency : CAD) give up ground across the board.

Pound Sterling Forecast to Soften against NOK, CAD when Oil Prices Rebound

Developments in the oil market led many economists to conjure up the memories of Saudi Arabia’s price war on other producers which sent crude down to as low as $9 per barrel at the end of the last century.

However, many oil insiders take a different view; a significant minority of energy experts feel that the Iran-fuelled increase in supply will be more than off-set by a scaling back of production in nations, such as the US, where the costs of extraction remain relatively high.

Their suggestion is that the change in behaviour from marginal producers will see demand for oil outstrip supply during the second half of the year, sending the Pound Sterling (currency : GBP) lower against the Canadian Dollar and the Norwegian Krone, with global shares markets recovering as a consequence.

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TAGS: Canadian Dollar Forecasts Norwegian Krone Forecasts Pound Canadian D Forecasts