It was less than a week ago that the price of crude oil was pummelled, following a decision by the International Energy Agency to release 60 million barrels of oil from strategic reserves - a blow to energy speculators and anyone else who entertained visions of triple-digit oil prices. And now? On Wednesday afternoon, oil traded close to $95 (U.S.) a barrel, up about $2 and marking a 4.7 per cent rebound from last week's lows. That's right, the price of oil is now higher than it was before the IEA announcement. (It settled in New York today at $94.77)
As some observers have been pointing out, there are other factors affecting the price of oil - like demand - especially in the longer term. A U.S. government report on Wednesday showed that oil inventories declined for a fourth straight week, falling 1.2 per cent for the period ended last week. That was a sharper decline than analysts had been expecting.
Energy producers rose with the price of oil, but the Canadian dollar was also affected. The loonie had been higher after Statistics Canada reported earlier that inflation rose at a 3.7 per cent clip in May - its biggest annual jump in about eight years and ahead of expectations, putting pressure on the Bank of Canada to raise interest rates.
But stronger oil prices gave the dollar another jolt, underlining its reputation as a petro-currency and a favourite among investors when bullishness is in the air. In the afternoon, it was up 1.1 cents against the U.S. dollar, marking its biggest advance in about seven months. However, Thursday's report on Canadian gross domestic product for April could just as easily send the loonie back down.
"Any fear about rates that has crept into the market in the aftermath of the CPI data may be tempered by the GDP data tomorrow," said Shaun Osborne, chief currency strategist at Toronto-Dominion Bank, according to Bloomberg News. "It's expected to be weak and underscore the headwinds facing the economy."