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Traders Are Tracking the US Dollar, Rigs, and Inventories

PART:
1 2 3 4 5
Part 2
Traders Are Tracking the US Dollar, Rigs, and Inventories PART 2 OF 5

Fed Raised the Interest Rate: Will It Pressure Crude Oil Prices?

Crude oil futures 

July West Texas Intermediate crude oil (RYE) (VDE) (USO) futures fell 0.4% and were trading at $44.58 per barrel in electronic trade at 1:30 AM EST on June 12, 2017. Prices fell due to oversupply concerns. Expectations of slowing demand from Asia also pressured crude oil prices.

US crude oil prices have fallen ~12% since OPEC’s meeting. Lower oil prices have a negative impact on oil and gas exploration and production companies’ earnings. Oil producers like Noble Energy (NBL), Stone Energy (SGY), and Denbury Resources (DNR) have fallen 28.3%, 10%, and 62.8%, respectively, in the last six months.

Fed Raised the Interest Rate: Will It Pressure Crude Oil Prices?

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US Dollar Index  

The US Dollar Index fell 0.3% to 97 on June 16, 2017. It supported crude oil prices on June 16, 2017. The US dollar (UUP) was almost flat last week. The Fed increased the US benchmark interest rate by 25 basis points to 1.3% on June 14, 2017. It’s the third interest rate hike in the last six months.

The Fed has more plans for monetary tightening. Meanwhile, the Fed is concerned about weak inflation. The US dollar fell after the Fed announced the rate hike on June 14, 2017. The market already priced in the rate hike.

The US dollar hit 96.6 on June 6, 2017—the lowest level in seven months. The US Dollar Index has fallen 6.1% from its peak in January 2017. President Trump’s inability to deliver tax subsidies and fiscal stimulus pressured the US dollar.

The Fed’s next meeting will be held on July 25–26, 2017. A Bloomberg survey expects a rate hike in September 2017. The expectation of a rise in the US dollar due to a rate hike could have a negative impact on crude oil (BNO) (SCO) prices.

In the next part, we’ll discuss the energy calendar for this week.

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