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The Loonie is currently the best performing currency of the week, and may even end up as this week’s champion since it’s giving all its forex rivals the boot, as you can see on the table below.

Loonie Pairs Ranking (Apr.18-20, 2016)
Loonie Pairs Ranking (Apr.18-20, 2016)

The Loonie’s strength was very likely due to the oil rally during the week, so much so that Loonie pairs just shrugged off BOC Governor Stephen Poloz’s rather downbeat speech yesterday (Wednesday, April 20).

USD/CAD: 1-hour Forex Chart
USD/CAD: 1-hour Forex Chart

So, what are the most recent oil updates after the Doha Deal Debacle? Oh, for the forex newbies out there who are wondering what oil has to do with the Loonie, you can head over to our School’s lesson on How Oil Affects USD/CAD, but the short of it is that oil is one of Canada’s major exports, which is why the Loonie tends to track oil’s price action.

With that out of the way, what are some of the most recent oil updates that helped to send oil higher?

Kuwaiti Oil Workers’ Strike Ends

After the Doha oil freeze deal failed to pan out on Sunday, oil took a hit on Monday but was already off its lows by the time Monday’s morning London session rolled around, as market players jumped on any and all positive comments about oil, such as Russian Energy Minister Alexander Novak’s statement that “the door is not closed” on the oil freeze deal.

However, the one oil-related event that most market analysts were pointing to as the main driver for the post-Doha oil rally was the Kuwaiti oil workers’ strike, which reduced Kuwait’s oil output by around 50% (some say more than 60%). However, that strike was voluntarily ended on Wednesday, and Kuwait is now set to resume normal oil production levels, which naturally caused sentiment on oil to deteriorate again.

Rumors About Iraq Oil Freeze Talks

Pip Diddy noted in his morning London session recap yesterday (Wednesday, April 20) that oil benchmarks were recovering again after retreating earlier due to the end of the Kuwaiti oil workers’ strike. However, Pip Diddy said that he can’t find any catalysts for the oil recovery at the time.

Well, it turns out that rumors about another oil freeze deal were apparently the reason for oil’s recovery. Specifically, Iraq’s Deputy Oil Minister Fayyad Al-Nima supposedly said that OPEC and some non-OPEC oil producers were planning to have a little pow-wow in Russia by next month at the earliest.

Unfortunately, Russian Energy Minister Alexander Novak put these rumors to rest by saying that he is “not sure that Opec countries will reach an agreement among themselves.” To make matters worse, Novak upgraded his forecasts for Russia’s oil output in 2016 from 10.78 million barrels per day to 10.92 million barrels per day. Oil slightly dipped because of Novak’s comments, but no worries because of…

The IEA’s Oil Output Projections

The International Energy Agency (IEA) announced earlier that non-OPEC oil production will fall hard in 2016, with IEA Chief Fatih Birol saying that “This year, we are expecting the biggest decline in non-OPEC oil supply in the last 25 years, almost 700,000 barrels per day. At the same time, global demand growth is at a hectic pace, led by India, China, and other emerging countries.”

The IEA also forecasted that the oil market will likely rebalance by the end of this year or next year at the latest. However, the fall in output of 700,000 barrels per day will not likely be able to offset the rise in oil supply if both Russia and Saudi Arabia make good with their threats to ramp up oil production, with both oil titans saying that they can pump up their oil output by 2 million barrels per day apiece. Meanwhile, Iran continues to increase its oil output, with 4 million barrels per day being the target output level (currently at 3.3 million barrels per day).

Overall, the oil glut that I pointed out in my earlier write-up is still a reality. And the oil glut will likely worsen if both Russia and Saudi Arabia decide to increase their oil output.