Weak vs. Strong Dollar
Posted: Wed Oct 26, 2022 10:43 am
I know that a strong dollar depresses price of oil and vice versa but I don't really understand how/why that works. Can you explain?
Oil trades in US dollars in most of the world. So, a stronger US dollar buys more oil.
Oil prices are set on the global market. Natural gas prices are set on regional markets.
This world is "short oil" and demand goes up in the winter.
The US natural gas market is "tight", but not dangerous like it is in Europe.
BTW a strong US dollar actually puts pressure on all commodities. It should be pushing down food prices too, but our supply chain problems and high fuel prices are putting upward pressure on food prices.