What Do Key Economic Indicators Suggest for Crude Oil?



US GDP numbers

The US (SPY) (VOO) GDP (gross domestic product) grew at an annual rate 0.8% in 1Q16, according to a US Department of Commerce report on May 27, 2016. Analysts expected an ~0.9% rise.

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How did the GDP numbers impact crude oil prices?

The GDP rate is one of the most important economic data points that impacts interest rate decisions. The Market’s expectation of a rate hike could strengthen the US Dollar Index (UUP). This could weaken crude oil prices. The GDP reported was a revision from an earlier figure of 0.5%. On the other hand, stronger GDP data could imply stronger fuel consumption. This would be bullish for crude oil prices. Weaker GDP data could mean weaker fuel consumption.

US Dollar Index and crude oil

The one-month correlation of crude oil prices with the US Dollar Index was -9.2% on May 27, 2016. The correlation is negative. It shows the US dollar’s inverse impact on crude oil prices.

The above analysis is important for crude oil–weighted stocks such as Abraxas Petroleum (AXAS), Triangle Petroleum (TPLM), and Denbury Resources (DNR). The Direxion Daily Energy Bear 3X Shares ETF (ERY), the First Trust Energy AlphaDEX Fund (FXN), the United States Brent Oil Fund (BNO), and the United States Oil Fund (USO) are also impacted by economic data and the correlation of crude oil prices with the US Dollar Index.

In the next part of this series, we’ll look at the weather forecast and how it will impact natural gas prices.


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