Crude oil prices
December WTI (West Texas Intermediate) crude oil futures contracts fell 2.1% and settled at $48.7 per barrel on October 28, 2016. Brent crude oil futures also fell 1.5% and closed at $49.7 per barrel. Prices fell due to lower expectations for OPEC’s (Organization of the Petroleum Exporting Countries) plan to cap production. For more on OPEC, read Part 4 of this series.
US Dollar Index
The US Dollar Index fell 0.5% to 98.3 on October 28, 2016. US Dollar Index fell due to political uncertainty in the US. The FBI (Federal Bureau of Investigation) reported that it would probe emails related to presidential candidate Hillary Clinton. The US Dollar Index hit 98.8 on October 27, 2016—the highest level in nine months. The US Dollar Index also rose in early morning trade on October 28, 2016, due to better-than-expected advance estimates for US GDP. So far, the US Dollar Index has risen 3% in October 2016.
The PowerShares DB US Dollar Bullish ETF (UUP) tracks the performance of the US dollar. It fell 0.59% on October 28, 2016.
US dollar and crude oil
The US dollar and crude oil are usually inversely related. A weaker US dollar makes crude oil more affordable for oil importers and vice versa.
A recent survey suggested that 70% of traders expect an interest rate hike from the Fed in December 2016. An improvement in the US consumer price index would support an interest rate hike. So, volatility in the US dollar could swing crude oil prices in the coming months.
Impact on stocks and ETFs
The rollercoaster ride in crude oil prices can impact oil and gas exploration and production companies’ earnings such as Comstock Resources (CRK), Northern Oil & Gas (NOG), and Triangle Petroleum (TPLM).
Volatility in crude oil prices impacts ETFs and ETNs such as the Direxion Daily Energy Bear 3x ETF (ERY), the Fidelity MSCI Energy ETF (FENY), the United States 12 Month Oil ETF (USL), the SPDR S&P Oil & Gas Equipment & Services ETF (XES), the DB Crude Oil Double Short ETN (DTO), the Direxion Daily Energy Bear 3x (ERY), and the United States Brent Oil ETF (BNO).
What’s in this series?
In this series, we’ll focus on major oil producers’ meeting, 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.
Let’s start by looking at the energy calendar for this week.