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US Dollar Is near a 10-Month Low: Will Crude Oil Prices Rise?

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Updated

Crude oil futures 

August US crude oil (XES) (IEZ) (XOP) futures contracts were flat at $46.02 per barrel in electronic trade at 2:15 AM EST on July 18, 2017. Prices have recovered from a ten-month low due to improving crude oil demands.

Higher crude oil prices have a positive impact on oil producers like Bill Barrett (BBG), ConocoPhillips (COP), and Bonanza Creek Energy (BCEI).

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US Dollar Index 

The US Dollar Index fell 1% to 94.9 on July 10–17, 2017. The US dollar fell due to uncertainty about the Fed’s interest rate hike. Traders aren’t sure when will the Fed will raise the interest rate in 2017. Traders think that the Fed might not hike the interest rate in 2017. The US dollar is at the lowest level since September 2016.

The PowerShares DB US Dollar Bullish ETF (UUP) tracks the US dollar’s performance. It was flat at 24.6 on July 17, 2017. UUP has fallen 7% YTD.

US dollar and crude oil 

Crude oil and the US dollar are inversely related. A weak dollar makes crude oil (XLE) (USO) (UCO) economical for crude oil importers. As a result, it benefits crude oil prices.

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US dollar’s high and low 

So far, the US dollar has fallen 8% in 2017. The US dollar is at the lowest level in almost ten months. President Trump’s inability to deliver tax subsidies and fiscal stimulus pressured the US dollar.

The US Dollar Index hit a high of 103.8—its highest level in 14 years—on January 3, 2017.

Impact 

The possibility of a weak dollar in the short term is bullish for crude oil (IEZ) (SCO) prices.

In the next part, we’ll discuss US crude oil inventories and oil stored in tankers.

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