Relationship between the US dollar and Oil prices

There’s an inverse relationship between the US dollar and oil prices. Actually most commodities typically follow and inverse relationship with the value of the dollar. When the dollar strengthens against other major currencies, the prices of commodities typically drop. There are many reasons on why the US dollar has an impact on commodity prices, but one of the main reason is that the barrel of oil is price in US dollar. A weaker US dollar translates into a higher oil prices. I have obviously dumb down the example as it can get much more complex with so many other variables such as interest rates. Anyway I though this chart was pretty interesting, I decided to share it.

US DOLLAR INDEX vs. WTI Crude Oil Photo credit: Bloomberg

crude-oil-dollar-2
Photo credit: ForexKarma

Fact of the day: 1 barrel of oil = 158.987295 liters or 42 US gallons.

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3 thoughts on “Relationship between the US dollar and Oil prices

  1. […] US Dollar Index vs WTI Crude Oil, Bloomberg,15/02/2016According to Investopedia crude oil is quoted in U.S. dollars (USD) so that each uptick and downtick generates immediate realignment between the greenback and numerous forex crosses. These movements are less correlated in nations without significant crude oil reserves, like Japan, and more correlated in countries that have large reserves, like Canada, Russia, and Brazil. […]

  2. […] US Dollar Index vs WTI Crude Oil, Bloomberg,15/02/2016According to Investopedia crude oil is quoted in U.S. dollars (USD) so that each uptick and downtick generates immediate realignment between the greenback and numerous forex crosses. These movements are less correlated in nations without significant crude oil reserves, like Japan, and more correlated in countries that have large reserves, like Canada, Russia, and Brazil. […]

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