Oil prices are looking to break resistance at $55.03 making 2017 new highs. Decline oil stocks and solid growth in demand has overcome weather and geopolitical issues. Brent is now trading above $60brl and futures backwardation has invited deeper buying in the long end of the curve. OPEC has sighted their success in supply restrain pointing to falling inventories. It seem that WTI at $55 is likely to maintain.
However, commodity liked currencies have not following oil prices higher. CAD and NOK have diverged significantly from oil prices in recent weeks. It is not uncommon for decoupling but the divergence rarely is for an extended period. The rationale is the convergence of higher oil at the same time US rates have risen, which reduced the sensitivity to external influenced. With US yields stabilizing we would watch for CAD and NOK to catch up to higher oil.
By Peter Rosenstreich