Weaker US dollar pushes the oil price up - modestly

 

US dollar vs oil price

The oil price, which entered the green zone on market charts on Monday, continues to stay that way, but with relatively modest increases in price.

The momentum that we saw on Monday, especially in the Asian markets, has clearly slowed down.

Analysts were bracing themselves for a big impact on the markets in general and oil in particular in the wake of the remark made by Jay Powell, the Chair of Fed Reserve, on April 4; he mentioned that the worlds’ biggest economy is reaching a ‘reflection point’ – a period of accelerated growth followed by something akin to a stagnation.

Since oil is still in the green territory on Tuesday, it’s worth looking at the strength of the US dollar to see whether it was the latent factor that is behind the rise in oil price, despite that being pretty modest.

The relationship between the strength of the US dollar and the oil price has long been established; the stronger the dollar, the lower the oil price becomes. At present, the dollar has weakened a bit and in inverse proportion to that the oil price has climbed.

US dollar and oil price - inverse realation


The demand concerns in Asia, meanwhile, are growing in light of accelerated infection rates; In India the situation is very grim; in the rest of Asia, there is no room for complacency either.

India, which managed to initiate a successful vaccine rollout a few months ago, is struggling to maintain the momentum to keep it afloat due to shortages of vaccines and many logistical challenges that stem from rising infections across the vast country.

Since two of the biggest economic engines in the world are in the region of Asia, the oil markets are closely watching the situation, as the health of the former clearly determines the demand of the commodity.

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