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Sources close to analysts at “Sun Worldwide”, the Asian-based boutique brokerage, say they are more bullish than ever on the prospects for the Canadian dollar as the price of crude oil continues to advance higher.
This is because Canada has the world’s second largest reserves of oil after Saudi Arabia. This oil is, however, contained within what are called oil tar sands and is expensive to extract at a profit unless oil trades consistently above $75 a barrel.
As this number is now in play with economic recovery in emerging markets well underway, “Sun Worldwide” believes that this will underpin the strength of the currency and the Canadian economy in the years going forward.
The “Sun Worldwide” analysts also cite the fact that Canada’s banking system is in far better shape than those of its counterparts in the G8 since robust regulation prevented its banks taking excessive risks in the mortgage market that has proved so cataclysmic for US and European banks.
One of the “Sun Worldwide” sources suggested that although there is significant opposition to development of oil tar sands production by environmental groups, it is likely that world demand for oil will overcome such resistance.
Several multi-national oil companies including BP and Royal Dutch Shell have committed billions of dollars to the construction of refineries.
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