According to the company FactSet, engaged in financial research, West Texas Intermediate oil was being traded on the New York Mercantile Exchange CLM8 with an increase of 0.06%, which is 12.2% more than last month.
The coordinated spike in oil and dollar is rare, because a stronger dollar makes goods (valued in the currency) more expensive for those who use other currencies in the calculations. Thus, a stronger dollar is generally a headwind for commodity prices.
The most surprising aspect of the price rush for crude oil is that its cost has an inverse correlation with the dollar. Over the past year, the growth in prices for crude oil basically coincided with a decline in the dollar. Nevertheless, over the past four weeks, the US dollar index has shown a significant jump by more than 3%. However, the trend in the behavior of crude oil prices has not changed, continuing to grow. The analysts of Bespoke Investment Group noted that the resource had received additional 10%.
The current situation with the US dollar and WTI oil is quite a rare phenomenon. This is the 11th time since 1983. 35 years ago the market recorded a simultaneous increase in crude oil (more than 10% over the same four-week period) and the US dollar (more than 3%).
The experts attribute the revival in the energy market to the fact that the production constraints imposed by OPEC + and other major oil producers seem to have achieved the desired goal – to absorb the glut of crude oil.
On Tuesday, US President Donald Trump publicly announced the US withdrawal from the multilateral Iranian nuclear accord. As a result, the market reacted by raising the price of oil futures. This happened as it feared disruptions in oil supplies.
In a research note published on Wednesday, Jeffrey Saut, chief investment strategist at the investment holding Raymond James, said that simultaneous oil and dollar rallies were extremely rare but that was not unprecedented.
In recent months, oil prices have risen to levels that have not been observed for 3.5 years. We recall that the global surplus of crude oil put energy markets in a tailspin in 2014.
On Monday, June futures for West Texas Intermediate crude oil rose by $ 1.01( or about 1.5%) to $ 70.73 per barrel on the New York Mercantile Exchange.
On the London Stock Exchange ICE Futures, the price of July futures for Brent crude oil amounted to 75.64 US dollars per barrel, an increase was 0.77 US dollars (1.03%).
James Williams, economist at WTRG Economics, said that one of the reasons for the oil jump was the OPEC agreement (organization of oil-exporting countries) on limiting oil production.
According to the deal, which was implemented in early 2017, OPEC and other major oil-producing countries, including Russia, agreed to cut oil production by about 1.8 million barrels per day since the end of 2016. This was done in order to eliminate the long-term surplus of global oil supplies to the market.
The International Energy Agency forecasts this year world demand for oil at the level of 99.3 million barrels per day compared to 97.8 million barrels per day in 2017.
The material was prepared with the participation of Katya Gordon,
a leading analyst of the brokerage company CT Trade