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US Dollar Hit a 7-Month Low: Where Are Crude Oil Bulls?

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Crude oil futures 

July WTI (West Texas Intermediate) crude oil (RYE) (VDE) (XLE) futures trading in NYMEX rose 1.4% and were trading at $48.3 per barrel in electronic trade at 1:45 AM EST on June 5, 2017. Prices rose due to geopolitical tensions between Middle East countries, which could result in supply disruptions.

Prices have fallen 7.2% since OPEC’s meeting on May 25, 2017. Last week, OPEC officials met to deepen the production cut, according to Reuters sources. They might announce a deeper cut or a longer production cut period for the existing proposal, which could drive oil prices.

The rollercoaster ride in crude oil prices impacts oil and gas producers’ earnings like ExxonMobil (XOM), PDC Energy (PDCE), and Continental Resources (CLR). For more on crude oil prices, read Part 1 and Part 4 of this series.  

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US Dollar Index  

The US Dollar Index fell 0.6% to 96.6 on June 2, 2017—the lowest level in seven months. The US dollar (UUP) fell due to a less-than-expected rise in US jobs in May 2017. US non-farm jobs rose by 138,000 in May 2017—compared to the market’s forecast of 185,000. The US unemployment rate is at 4.3%—a 16-year low.

The US Dollar Index has fallen 6.4% from its peak in January 2017. President Trump’s inability to deliver tax subsidies and fiscal reform also weighed on the US dollar. However, broader markets like the S&P 500 (SPY), Dow Jones, and NASDAQ hit records on June 2, 2017.

A depreciating dollar usually has a positive impact on crude oil prices. A fall in the US dollar makes crude oil (IEZ) (XES) more economical for oil importers.

In the next part, we’ll discuss the energy calendar for this week. We’ll also discuss how WTI crude oil prices could perform this week.

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