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Will the US Dollar Support Crude Oil Prices This Week?

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Nov. 20 2020, Updated 3:41 p.m. ET

Crude oil prices  

WTI (West Texas Intermediate) crude oil (BNO) (USL) (XES) futures contracts for May delivery fell 0.4% and were trading at $52.9 per barrel in electronic trade at 2:45 AM EST on April 11, 2017.

Crude oil prices are at a one-month high. Broader markets such as the S&P 500 (SPY) (SPX-INDEX) and NASDAQ Composite Index are near all-time highs. Bullish momentum in the US stock market could support oil demand and oil prices. For more on crude oil prices, read Part 1 and Part 4 of this series.

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US Dollar Index, the Fed, and President Trump 

The US Dollar Index fell 0.2% to 100.9 on April 10, 2017. The US military launched missiles and hit a Syrian air base. The US dollar fell due to concerns about tensions with Syria. Read the previous part of the series to learn more.

However, the dollar hit a high of 103.8 on January 3, 2017—the highest level in 14 years. The dollar (UUP) rose due to the following factors:

  • the Fed’s interest rate hike by 25 basis points on March 15, 2017, to 0.75%–1%
  • improving US jobs market
  • expectations of fiscal stimulus and possible tax reforms under President Trump
  • expectations of rising US inflation
  • the Fed’s interest rate hike by 25 basis points on December 14, 2016, to 0.50%–0.75%

US dollar and crude oil 

The US dollar and crude oil (USO) (UCO) are usually inversely related. A fall in the US dollar makes crude oil more economical for oil importers. When the dollar falls, crude oil prices rise.

Moves in crude oil prices impact oil and gas producers’ earnings such as Noble Energy (NBL), Swift Energy (SFY), Hess (HES), and PDC Energy (PDCE).

Goldman Sachs (GS) predicts an interest rate hike in June 2017 and September 2017. The expectation of multiple interest rate hikes in 2017 could push the dollar higher. The strong US dollar is expected to be one of the key downside catalysts for crude oil prices in 2017.

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

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