The recent depreciation of the U.S. dollar against other major currencies has made crude oil purchases for some oil importers cheaper, the U.S. Energy Information Administration (EIA) said on Friday.
As the euro is the main currency that has appreciated against the U.S. dollar, the countries of the Eurozone, many of which are net crude oil importers, have seen their crude purchases less expensive this summer, because oil is priced in U.S. dollars.
Between June 1 and August 12, Brent Crude oil prices rose by 19 percent in U.S. dollars but only 12 percent in euros as a result of the euro's appreciation against the U.S. dollar, the EIA has estimated.
Brent Crude prices and the index of the value of the U.S. dollar have been moving in opposite directions on a daily basis during the past several months. The two measures are responding to similar economic information-in this case, the outlook for global economic growth and demand expectations, the EIA said.
In recent weeks, even if expectations of global oil demand have been revised down due to the lasting impact of the COVID-19 pandemic, weakening U.S. dollar has supported oil prices. A weaker U.S. dollar typically makes buying oil cheaper for holders of other currencies.
This week, a bullish inventory report from the EIA supported oil prices, after a crude oil inventory draw of 4.5 million barrels for the week to August 7, an inventory decline of 700,000 barrels in gasoline, and a draw of 2.3 million barrels in distillate fuels for the week to August 7.
The draw across the board supported oil prices, until the International Energy Agency (IEA) and OPEC revised down their projections for oil demand this year, acknowledging that the COVID-19 pandemic would hit the global economy and oil consumption harder than previously thought.
By Michael Kern for Oilprice.com
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Michael Kern is a newswriter and editor at Safehaven.com and Oilprice.com, More