Canada’s biggest major export and arguably economic performance in the near future rides on the decision that could be made today by the major oil producing nations. For the last 2 years’ oil prices, have been falling and there could finally be an agreement to limit the supply in turn increasing the price of a barrel.
Experts predict there is as much as $490 billion riding on the decision with many expecting an agreement to cause a significant jump in the price of oil. However, the more cynical side predict that there is going to be a continuation of the already existing problem and no one will agree.
Much of this problem was caused in the first place by the introduction of Iran’s oil into the market. Iran were barred from trading but their embargo was lifted and they flooded the market with huge stocks at a very cheap price. This was met by Saudi Arabia this summer ramping up production, producing the highest output ever in a month.
The decision could have a major effect however it is not clear if there is a limit as to what that might be. It seems very unlikely that there will be a return to the $140 a barrel level from a few years ago, but a jump seems likely. The final point to consider is what level of profitability different productions have, for example the cost in the North Sea to produce a barrel is high and it’s not profitable until the cost of a barrel is a $60. With that in mind if the production levels aren’t curbed enough some producers will know they won’t become profitable, which could put is back to square one.
Inevitably a huge jump in the oil price could significantly improve the strength of the Canadian Dollar which has come under some recent pressure from Donald Trump’s victory also.