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Crude Oil Has Risen since June: Time to Short Crude Oil Futures?

PART:
1 2 3 4 5 6
Part 3
Crude Oil Has Risen since June: Time to Short Crude Oil Futures? PART 3 OF 6

President Trump Could Limit the Upside for Crude Oil Futures

US dollar and President Trump

The US Dollar Index rose 0.98% to 92.88 on September 25–29, 2017. It’s the best weekly gain since December 2016. The US dollar (UUP) is near a five-week high. Last week, President Trump proposed his tax reform package, which aims to reduce the taxes on US corporations and households. It’s the biggest tax reform in 30 years. The proposal supported the US dollar last week. The Fed left US interest rates unchanged on September 20, 2017. The Fed might hike the interest rates in December 2017, which also supported the US dollar in the last two weeks.

President Trump Could Limit the Upside for Crude Oil Futures

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US dollar’s performance 

The US dollar has risen 0.3% in September 2017—compared to the previous month. However, the US dollar (UUP) is near a 33-month low. The US dollar has fallen 11% year-to-date. President Trump’s inability to deliver on tax reforms and infrastructure spending pressured the US dollar. The euro is near a 30-month high, which also weighed on US dollar.

US dollar highs and lows 

On September 8, 2017, the US dollar hit a low of 90.99—the lowest level since January 2015. The US dollar hit a high of 103.8 on January 3, 2017, which is the highest level in 14 years. 

Relationship between the US dollar and crude oil 

The US dollar and crude oil (USO) (UCO) prices are usually inversely related. A strong US dollar makes crude oil expensive for crude oil importers. As a result, it pressures crude oil prices. Similarly, a weak dollar can support crude oil prices.

Impact  

Expectations of a strong dollar could pressure crude oil (UWT) (DWT) prices. Lower crude oil prices have a negative impact on oil producers (VDE) (IEZ) like Continental Resources (CLR), Denbury Resources (DNR), and Goodrich Petroleum (GDP).

In the next part of this series, we’ll analyze crude oil price drivers in the last 18 months.

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