Don’t waste your time – keep track of how NFP affects the US dollar!

Data Collection Notice

We maintain a record of your data to run this website. By clicking the button, you agree to our Privacy Policy.

facebook logo with graphic

Join Us on Facebook

Stay on top of company updates, trading news, and so much more!

Thanks, I already follow your page!
forex book graphic

Beginner Forex Book

Your ultimate guide through the world of trading.

Get Forex Book

Check Your Inbox!

In our email, you will find the Forex 101 book. Just tap the button to get it!

FBS Mobile Personal Area

market's logo FREE - On the App Store

Get

Risk warning: ᏟᖴᎠs are complex instruments and come with a high risk of losing money rapidly due to leverage.

76.5% of retail investor accounts lose money when trading ᏟᖴᎠs with this provider.

You should consider whether you understand how ᏟᖴᎠs work and whether you can afford to take the high risk of losing your money.

Oil Prices Might Cause Another Inflation Wave

Oil Prices Might Cause Another Inflation Wave

Information is not investment advice

US oil exports reached a record last week at five million barrels a day, according to Energy Information Administration data. Moreover, EIA reported the US oil inventory shortage by 7 million barrels last week, combined with the decline in the US oil production of 12.1 million BPD versus 12.2 million BPD earlier.

photo_2022-08-18_13-14-19.jpg

The fact that the United States spends more oil from its reserves while the production stays the same explains why the global oil inventories have decreased in the United States since 2019. 

photo_2022-08-18_16-54-26.jpg

In the current conjunction, it’s too early to expect a cooling of oil prices soon. Moreover, more factors make the situation even worse:

1) Sanctions versus Russia due to the conflict in Eastern Europe.

Sanctions include:

  • European Union ban on all imports of oil brought in by sea from Russia by the end of 2022.
  • The US ban on all Russian oil and gas imports.
  • The UK ban on all oil imports by the end of 2022.

Russia has always been one of the biggest oil exporters in the world and the largest one for the European continent. Nowadays, the USA has replaced Russia in the European market, but how long can the USA supply the European continent with its reserves? The question is rhetorical.

2) The United States and Asian countries replace Russian oil in Europe, but it’s too expensive.

Giant supertankers hauling crude oil across the globe have made the most money in more than two years, thanks to swelling shipments from the US and the Middle East. Benchmark earnings for huge crude carriers neared $40 000 a day on Wednesday to hit the highest level since June 2020. Assessments in the industry standard Worldscale system have jumped almost 40% over a week. Transporting oil by sea is not only expensive, but it takes much more time. Moreover, natural disasters such as droughts and storms can affect supply chains.

  • The industry is underinvested.

Earlier, we have already highlighted the fact that the oil industry is underinvested. New OPEC Secretary-General Haitham Al Ghais confirmed it. "There are other factors beyond OPEC that are really behind the spike we have seen in gas [and] in oil. And again, I think in a nutshell, for me, it is underinvestment — chronic underinvestment," he added.

For example, the main global oil supplier, Saudi Arabia, might raise its production capacity to 13 million barrels per day by 2027 from a capacity of 12 million now, and "after that, the Kingdom will not have any more capacity to increase production."

3) Chinese economy is going through hard times. But how long will it last?

According to the latest data, Chinese industrial production was up 3.8% year-on-year in July, but down from 3.9% in June and well below analysts' forecasts. To answer that, the People's Bank of China increased key interest rates in a surprise move. If the Chinese central bank keeps supporting the economy, the recession might be avoided.China is the first oil exporter in the world. Thus, potential economic stabilization will significantly increase the oil supply, pushing prices higher.

The bottom line

The exclusion of Russian oil for the European countries and the US, supply chain risks, sector underinvestment, the inability to increase production, the decrease in US inventories, and potential Chinese economic recovery - factors that lead to the energy market crisis and keep oil prices on the high level. In turn, high oil prices cause rising inflation in the US and European countries.

However, the US dollar wins in times of rising inflation, while other currencies stay under heavy pressure.

Technical analysis

XBRUSD, daily chart

XBRUSDDaily.png

The price is consolidating in the bullish wedge ahead of some key news. After the breakout of the upper wedge’s border, XBRUSD will head towards 98.60. The text target will be 104.00.

XBRUSD, weekly

XBRUSDWeekly.png

Another important fact is that buyers still manage to hold prices above the 50-week moving average. If this weekly candle closes above this support, it will be a sign of an upcoming bull run during the upcoming week.

US dollar index, weekly

UsDollarWeekly.png

US dollar index is heading towards the 110.00 resistance, the potential point of the global reversal for the USD. Recent pump highlights the probability of rising inflation in the United States, which might be provoked by the upcoming oil prices jump.

If you want to find the highest point for the US dollar index, draw a “divergence” line on the weekly RSI chart. Technically, if the RSI touches this trendline and bounces off from it, the USD will finally reverse.

 LOG IN

Similar

What can drive oil below $90 a barrel?

The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.

Popular

Gold isn't saving investors from inflation

Many investors treated gold as a protection against inflation. However, last week, gold lost its major support and dropped despite rising inflation. Why did it act like this?

Choose your payment system

Feel the Team Spirit

Callback

Please fill in the form below so we can contact you

Select the best time for us to call you. We give calls from Monday to Friday in suggested intervals. In case we couldn't get through, we will try again at the same time the next day. For getting real-time assistance, use FBS chat.

We provide only English-speaking callbacks. If you prefer any other languages, contact the support team.

We will call you at the time interval that you chose

Change number

Your request is accepted.

We will call you at the time interval that you chose

Next callback request for this phone number will be available in 00:30:00

If you have an urgent issue please contact us via
Live chat

Internal error. Please try again later