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A Strong Dollar Would Be An Unbearable Burden For Oil

Analysts say the dollar index will continue to strengthen in coming months, which should be a bigger concern for oil bulls than a worsening global trade environment.

Investors are weighing up the rise and fall in oil prices, with bullish factors including possible supply terminals for Iranian exports, a drop in venezuela's crude output, and bearish factors including increased OPEC production, rising U.S. crude production and a stronger dollar.

There are big variables in the oil market right now, the most important of which is Iran.Tamas Varga, a senior analyst at PVM, said on Monday that if Iranian crude exports were cut by up to or even more than 1 million barrels a day, oil prices would likely rise above the may high.

However, analysts say the biggest threat to oil prices is not trade frictions between China and U.S or Iran, but the strengthening dollar.

A strong dollar would hurt oil demand

Analysts said U.S. crude was volatile Monday, with oil prices recovering losses after hitting a 200-day moving average, trading near $67.50.Oil, meanwhile, hit a 13-month high on Monday as risk aversion intensified in response to the Turkish crisis and money flowed into the dollar.In Asian trading Tuesday, the U.S. index traded near 96.30 in volatile trading.

Normally, a rise in the dollar would weigh on oil prices, although that's not always the case, but analysts say the recent strength of the dollar has certainly made oil bulls more cautious.That was not evident, however, because of concerns about a decline in Iranian crude exports.


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