Early oil price correction difficult to forecast
Undoubtedly, a significant factor pushing up oil prices has been the weakness of the US dollar. Funds have invested in oil (and other commodities denominated in dollars) as a hedge against the decline in the dollar and rising inflationary pressures. Higher oil prices have also served as a hedge against the falling dollar for the oil producing countries.
The dollar is unlikely to give much support to oil prices in the near term. Indeed, the euro could yet see fresh highs against the dollar in the coming weeks with a move through $1.60 and beyond quite likely. Over the longer term, though, we are a little more optimistic for the dollar.
