Crude oil prices
November West Texas Intermediate crude oil futures contracts rose 3.3% and settled at $45.93 per barrel on September 26, 2016. Prices rose due to renewed hope of an output cap by major oil producers at their meeting in Algeria and a weak dollar. Brent crude oil futures also rose 3.2% and closed at $47.35 per barrel.
US Dollar Index
The US Dollar Index fell 0.2% to 95.30 on September 26, 2016. The US Dollar Index hit a week’s low on September 26, 2016. Uncertainty around the US presidential debate on September 26, 2016, pressured the US dollar.
The PowerShares DB US Dollar Index Bullish ETF (UUP) tracks the performance of the US dollar. It fell 0.2% on September 26, 2016.
US dollar and crude oil
The US dollar and crude oil are usually inversely related. The depreciation of the US dollar makes crude oil more affordable for oil importers and vice versa. On September 27, 2016, the US Dollar Index was trading at 95.4. The US Dollar Index rose to a four-month high of 97.5 on July 25, 2016.
A recent survey suggested that 59% of traders expect an interest rate hike from the Fed by the end of the year. The improvement in the US consumer price index would support an interest rate hike from the Fed. So, volatility in the US dollar could swing crude oil prices in 2016.
Impact on stocks and ETFs
Volatility in crude oil prices impacts oil and gas exploration and production companies’ earnings such as Synergy Resources (SYRG), Carrizo Oil & Gas (CRZO), and Sanchez Energy (SN). It also impacts ETFs and ETNs such as the Direxion Daily Energy Bear 3x (ERY), the iShares Global Energy ETF (IXC), the iShares U.S. Oil Equipment & Services ETF (IEZ), and the United States Brent Oil ETF (BNO).
What’s in this series?
This series will focus on oil producers’ meeting, the American Petroleum Institute’s crude oil inventories, Cushing crude oil inventories, the US crude oil rig count, the Commodity Futures Trading Commission’s “Commitments of Traders” report, and some crude oil price forecasts.
In the next part of this series, we’ll look at the energy calendar for this week.