• 2 hours Iraqi Forces Find Mass Graves In Oil Wells Near Kirkuk
  • 3 hours Chevron Joint Venture Signs $1.7B Oil, Gas Deal In Nigeria
  • 4 hours Iraq Steps In To Offset Falling Venezuela Oil Production
  • 6 hours ConocoPhillips Sets Price Ceiling For New Projects
  • 3 days Shell Oil Trading Head Steps Down After 29 Years
  • 3 days Higher Oil Prices Reduce North American Oil Bankruptcies
  • 3 days Statoil To Boost Exploration Drilling Offshore Norway In 2018
  • 3 days $1.6 Billion Canadian-US Hydropower Project Approved
  • 3 days Venezuela Officially In Default
  • 3 days Iran Prepares To Export LNG To Boost Trade Relations
  • 3 days Keystone Pipeline Leaks 5,000 Barrels Into Farmland
  • 4 days Saudi Oil Minister: Markets Will Not Rebalance By March
  • 4 days Obscure Dutch Firm Wins Venezuelan Oil Block As Debt Tensions Mount
  • 4 days Rosneft Announces Completion Of World’s Longest Well
  • 4 days Ecuador Won’t Ask Exemption From OPEC Oil Production Cuts
  • 4 days Norway’s $1 Trillion Wealth Fund Proposes To Ditch Oil Stocks
  • 4 days Ecuador Seeks To Clear Schlumberger Debt By End-November
  • 4 days Santos Admits It Rejected $7.2B Takeover Bid
  • 5 days U.S. Senate Panel Votes To Open Alaskan Refuge To Drilling
  • 5 days Africa’s Richest Woman Fired From Sonangol
  • 5 days Oil And Gas M&A Deal Appetite Highest Since 2013
  • 5 days Russian Hackers Target British Energy Industry
  • 5 days Venezuela Signs $3.15B Debt Restructuring Deal With Russia
  • 5 days DOJ: Protestors Interfering With Pipeline Construction Will Be Prosecuted
  • 5 days Lower Oil Prices Benefit European Refiners
  • 5 days World’s Biggest Private Equity Firm Raises $1 Billion To Invest In Oil
  • 6 days Oil Prices Tank After API Reports Strong Build In Crude Inventories
  • 6 days Iraq Oil Revenue Not Enough For Sustainable Development
  • 6 days Sudan In Talks With Foreign Oil Firms To Boost Crude Production
  • 6 days Shell: Four Oil Platforms Shut In Gulf Of Mexico After Fire
  • 6 days OPEC To Recruit New Members To Fight Market Imbalance
  • 6 days Green Groups Want Norway’s Arctic Oil Drilling Licenses Canceled
  • 7 days Venezuelan Oil Output Drops To Lowest In 28 Years
  • 7 days Shale Production Rises By 80,000 BPD In Latest EIA Forecasts
  • 7 days GE Considers Selling Baker Hughes Assets
  • 7 days Eni To Address Barents Sea Regulatory Breaches By Dec 11
  • 7 days Saudi Aramco To Invest $300 Billion In Upstream Projects
  • 7 days Aramco To List Shares In Hong Kong ‘For Sure’
  • 7 days BP CEO Sees Venezuela As Oil’s Wildcard
  • 7 days Iran Denies Involvement In Bahrain Oil Pipeline Blast
Alt Text

Why Oil Prices Will Keep Moving Up

With oil smashing through two-year…

The Biggest Threat To Oil Prices Is The Dollar, Not A Supply Glut

Oil Sands

The glut of gasoline and other refined products has taken center stage for the oil markets, threatening to initiate a new bear market and push oil prices down below $40 per barrel for the first time in months. But while a surplus of refined products is weighing on crude prices, there could be another culprit that does not get as much publicity.

Goldman Sachs says that a strong dollar deserves more blame for an oil price downturn, and further strengthening of the greenback looms as a much larger threat to prices than the gasoline glut. The U.S. Federal Reserve could raise interest rates and the effect of that, combined with lingering global financial uncertainty, could push oil prices below $40 per barrel. Goldman says that while there is indeed a glut of gasoline, it won’t be responsible for further declines in oil prices because it is a supply-side and not a demand-side problem.

“We are currently going through the typical later stages of an oil bear market, when strengthening crude fundamentals run into weakening product fundamentals,” Goldman wrote in a July 27 report. “Uncertainties on the near-term path of the oil market re-balancing have left the U.S. dollar as the primary driver to lower crude oil prices recently.” In other words, the fluctuation of the dollar could have a larger impact on oil prices than the fundamentals of oil supply and demand.

There are several other factors that could push oil back down to $35 per barrel or lower. They include a return of production from Libya or Nigeria (unlikely, but not impossible), a global slowdown in demand, or China’s move to slow its stockpiling of crude for its strategic petroleum reserve.

Any of those possible scenarios would erase the 230,000 barrel-per-day deficit that the investment bank is predicting for the second half of the year.

The dollar may loom over oil prices, but it fell by the most in nearly two months on Thursday after the Fed hinted that it would stay cautious. The greenback fell 0.5 percent against an array of currencies after the Fed wrapped up its Wednesday meeting without signs of an imminent rate increase.

By Charles Kennedy of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage


Leave a comment
  • Kr55 on July 28 2016 said:
    Would never have expected GS to be a voice of reason about the current panic. They are right, this is an inevitable step of the oil bear cycle. But, that doesn't stop people from trying to sell it like it's never happened before and the world is ending. Always money to be made from an overshoot in any direction, and always people out there willing to be manipulated.
  • John Scior on July 29 2016 said:
    someone at Goldman Sachs must be readingmy comments, either that or great minds think alike. See story :

    http://oilprice.com/Energy/Oil-Prices/Oil-Hits-50-But-Can-It-Maintain-Its-Gains.html
  • Chaz on August 02 2016 said:
    It would be the dollar -- IF the markets were not so nervous about every single bit of production.

    They go nuts because we have added 44 rigs and the Iraquis added 25,000 Barrels per day. That's Armageddon to them.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News