As Predicted, Dollar Surge Curbs Oil Prices

Wed May 18, 2016

In our last weekend update I suggested that an expected surge of dollar strength would likely put a cap on energy and metals prices. Well here is the

confirmation via the WSJ Energy Report.

MARKETS

Oil prices ticked lower on Wednesday pushed down by a stronger dollar as investors awaited key U.S. supply data.

International Brent crude remains near the $50 a barrel mark after a multi-week rally as outages in Africa and Canada and production declines outside of the Middle East region fuelled expectations of a tighter supply.

A stronger dollar ahead of the release of the latest minutes from the U.S. Federal Reserve pushed oil prices down on Wednesday. The Wall Street Journal Dollar Index, which tracks the greenback against a basket of other currencies, rose 0.4%. As oil is priced in dollars, it becomes more expensive for holders of other currencies as the dollar appreciates.

“[Oil prices] kept dancing around the $49-level… as markets are eying the latest oil inventory report this afternoon,” said Michael Poulsen, oil analyst at Global Risk Management. Read our latest market report at wsj.com.