Crude oil currencies dart higher ahead of OPEC+ summit

Crude oil currencies rallied today as the market reacted to the latest OPEC+ news. The Canadian dollar, Russian rubble, Mexican peso, and Norwegian krone have gained by 0.10%, 0.50%, 0.70% and 0.35% respectively.

Crude oil currencies rally

Oil is one of the most important commodities in the world. It powers virtually everything that we use every day.

Oil is drilled in several countries and consumed in all countries. As a result, this makes several currencies to move in accordance with the dynamics in the oil industry.

There are many currencies that are dependent on crude oil, including the Nigerian naira, Saudi Arabian riyal, and the Iranian riyal. But, most of these currencies are not easy to trade because they are not liquid enough. They are also not provided by most brokers.

The major crude oil currencies are the Canadian dollar, Mexican peso, Norwegian krone, and the Russian rubble. These currencies are highly liquid and they are also provided by most trading brokers. The currencies are important because of the volume of oil that they produce.

For example, Russia is the third-biggest oil producer in the world after the US and Saudi Arabia. Canada is number four. As shown below, these crude oil currencies have tracked the performance of oil this year.

Crude oil rise ahead of OPEC+ meeting

The currencies rallied today ahead of an important OPEC+ meeting that will happen tomorrow. In this meeting, the members will deliberate on the supply cuts that were agreed in May.

On Wednesday, doubts emerged on whether the meeting will take place because of compliance issues. OPEC members like Iraq, Nigeria, and Angola have been accused of not complying with these cuts. As a result, Saudi and Russia threatened not to hold the meeting until these culprits agree to cuts.

For example, Iraq was required to slash more than 929 million barrels, but it slashed just 311 million. Similarly, Nigeria had a shortfall of more than 279 million barrels while Kazakhstan had a shortfall of more than 126 million barrels.

According to Bloomberg, Saudi and Russia, who were in opposite sides in April have now united to push all the countries to comply. As a result, Iraq has agreed to not only comply but to also compensate for its failure to comply in the past. The two countries will now put pressure on the three other countries to slash their production.

The biggest for the Russians and Saudis as well as the crude oil currencies will be on whether Iraq can accept to cut production. That is because the country – together with Nigeria – have been accused of cheating in the past.

Another challenge for the currencies is that rising oil prices could incentivise American producers to restart their closed wells. This, in turn, will lead to more supplies at a time when demand is still low.

USD/MXN technical outlook

The USD/MXN pair is trading at 21.7700, which is close to the lowest level since March 16. On the daily chart, the price is below the 50-day and 100-day exponential moving averages. The price is also between the 50% and 61.8% Fibonacci retracement level. Its RSI has declined to its lowest level since January. Therefore, the pair may continue falling, as bears attempt to test the important support at 21.2885.