since October this year, the dollar index in international oil prices and a rare positive correlation. Generally, the international oil price in dollars, both the history shows negative correlation.

Although the dollar index has set a new high of 14 years, but the industry is expected, due to the global economic recovery in demand for crude oil could improve the stimulation, gradually return to fundamentals, if producers joint production are effectively implemented, the future overcapacity will be eased, prompted a further rise in oil prices.

The dollar, crude oil dropped significantly negative correlation

Data show that as of December 20th, the Chicago (CME Group), the New York Mercantile Exchange, NYMEX trading in February crude oil futures are the most active to close at $53.51 a barrel, the season has risen by more than 8%. Some analysts pointed out that the crude oil market will be affected by macroeconomic events and the dollar index, but the market is mainly in accordance with their fundamental guidelines, this year, crude oil prices by a greater impact on the supply side.

The current dollar interest rate cycle has entered a strong hard to stop. Founder medium-term researcher Sui Xiaoying said that the Fed rate hike under the background of global liquidity tightening, to maintain a strong dollar, dollar denominated crude oil prices will also be long suppressed, in addition, although the OPEC and non OPEC members agree on the next cut, which will accelerate the market rebalancing process, but whether the countries committed to implement production is still in doubt, more importantly, the relationship between supply and demand the improvement brought about by the rebound in oil prices will trigger the return of North American shale oil, which will in turn put pressure on oil prices. Overall, next year the crude oil market oversupply situation will be further repair, oil prices will continue to run the central move, but return to the North American shale oil will restrict upside height.

The relevant research institutions found that nearly a year, the dollar index and the international oil price deviation, in negative correlation over the past few years, both reached more than 90%, while in the negative correlation between the two is only about 40% this year.

Sui Xiaoying said that since the end of last year the United States dollars into the rate hike cycle, to maintain the overall strength, but from the absolute value of the dollar index, the uplink rate is not large, because of the increase in interest rates before the dollar index has been at a high level, while crude oil at the beginning of this year dropped to a low of $26, due to the high cost of production is out of the market, improve the oil supply and demand, oil prices bottomed out, under this background, the crude oil from between the dollar index and negative correlation trend.
Soochow Futures Institute Jiang Xingchun believes that the economic recovery is further enhanced, oil demand and improve supply contraction, oil price shocks on the behavior of the main. International oil prices mainly reflects the consumption and economic growth, the dollar index also indirectly reflects the strength of economic growth in the United States, in addition to the United States as an important global crude oil consumer, economic consumption, oil prices tend to rise or rebound. Currently, the commodity and the U.S. dollar to be consistent, the strong dollar to boost oil prices too high, expected prices relatively strong. If the production implementation in place, because the Fed rate hike estimated 2017 relatively moderate, the dollar index rose limited space, down more than 105 points in probability.

In the long term will suppress prices

The long run, Sui Xiaoying believes that to maintain a strong dollar on oil prices will still suppress the formation, but in the short term, prices will be more based on fundamentals, but no matter from the perspective of the dollar or from the crude oil supply and demand point of view, do not support oil prices continue to significantly stronger in the short term, but the long-term focus on the shift period. If the reduction of the effective implementation of the oil market, it is only in the conversion stage of excess supply to balance, it does not support the strong oil prices rise, in contrast, in the United States economy is relatively strong and the interest rate cycle, the dollar will remain strong.

In addition, Baocheng Futures Institute assistant director of financial Cheng Xiaoyong said that the Fed rate hike under the background of OPEC and non OPEC joint production to the current international crude oil supply surplus has a significant role in mitigation. EIA data show that in 2016 global crude oil surplus of about 500 thousand barrels a day, so if the production agreement can be executed, so to relieve excess pressure, to help the global crude oil inventories, 2017 crude oil prices significantly ease the downward pressure. However, with oil prices steady at $50 / barrel, U.S. shale oil production has gradually picked up, combined with Trump’s energy independence strategy, the United States will relieve fossil energy production restrictions, which means that OPEC and OPEC share of non joint production will be the US shale oil substitute, so the international oil price in 2017 is not optimistic.

Cheng Xiaoyong said, in the current strength of the dollar, the international oil price volatility may be steady, follow-up implementation of crude oil production, not to mention the United States shale oil production increases the crude oil prices greatly reduced. If the production are implemented, so we should pay attention to the speed of rebound in inflation and interest rates rise, if interest rates rise slowly will lead to stagflation possibility, oil prices may be stronger than the dollar.