Canadian economy enhances with OPEC’s plans to cut oil production

OPEC’s agreement to cut the oil production for the first time in eight years to boost oil prices had led to the growth of the Canadian economy in the third quarter at a quick pace in more than two years.

OPEC deal had a positive effect on the stock market on Wednesday, the commodity-heavy S&P/TSX composite index in Toronto rose up 83.04 points, and boost in energy sector by nearly eight percent.

This is because Canadian loonie is largely driven by oil prices.

“When you have a cut in production that tightens up on supply, when you have less supply it sends oil prices higher,” said Neil Shankar, economist at Toronto-Dominion Bank.

Shankar also expected that oil prices over the next few months will remain constant.

“Canada is a really oil-dependent economy, out west we have the oilsands, and given the fact that we now have oil prices trending higher we should see our dollar gain strength for the next little bit,” added Shankar.

Higher oil prices have boosted the Canadian dollar, which rose by almost two-thirds of U.S. cent on Thursday to trade above 75 cents U.S.

Data from Statistics Canada revealed gross domestic product exceeded economists’ expectations from 3.4 percent to at an annualized 3.5 percent, picking up from a contraction of 1.3 percent in the second quarter.

Speaking about the upward trending of the global market after Republican Donald Trump became president-elect of the United States, Shankar said, “I think there is a lot of uncertainty still if some of the stuff he campaigned on is going to be implemented, but what we have seen so far is a very optimistic approach.”

The price of oil continued to rise on Thursday, which added another four percent to just over US$51 a barrel.

The cartel will cut 1.2 million barrels a day from its present output.

OPEC President Mohammed Bin Saleh Al-Sada said OPEC’s proposal of reduced output of 32.5 million barrels a day, will come into effect in January.

(Reported by Asha Bajaj)