Between 2003-2005, the correlation between the Canadian dollar and oil prices has been approximately 80%. Canada is the ninth largest producer of crude oil in the world, and it continues to climb up the list, with production in oil sands increasing regularly. In 2000, Canada surpassed Saudi Arabia as the United States' most significant oil supplier. Unbeknownst to many, the size of Canada's oil reserves is second only to those in Saudi Arabia. The geographical proximity between the U.S. and Canada, as well as the growing political uncertainty in the Middle East and South America, makes Canada one of the more desirable places from which the U.S. can import oil. But Canada does not service only U.S. demand. The country's vast oil resources are beginning to get a lot of attention from China, especially since Canada has recently stumbled upon a new stash of oil after a reclassification of its Alberta oil sands to the "economically recoverable" category. This makes the Canadian dollar one of the currencies best positioned to benefit from an ongoing surge in oil prices.

Source: www.investopedia.com

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