Price Of Crude Oil (WTI) And Natural Gas (NGAS) Boosting US Dollar (USD) Which Jumps High

WTI Crude Oil Does Not Rule Out Further Losses

Energy prices continue to fly into the stratosphere, adding 30% since the start of April, strengthening at twice the rate of March. The last time US gas was this expensive was in October 2008.

Energy, oil, and gas have a very high price elasticity

Demand for American gas has surged as Europe tries to cut back on purchases from Russia as much as possible. But this also puts the current commodity sharply in short supply. Energy, oil, and gas have a very high price elasticity, meaning that a supply or demand shift of just a couple of per cent leads to a much higher price change.

Thus, the US provokes soaring prices on domestic markets by providing Europe with gas. Oil also receives a strong upward marches, not only as of the closest substitute but also as another Russian export that the world is in a hurry to abandon.

US dollar benefits from soaring oil and gas prices - 1

Oil prices managed to stay in an uptrend

WTI was back above $105, and Brent closed Thursday above $110, returning to levels of two weeks ago. Oil prices managed to stay in an uptrend, albeit this time as a slider amid accelerating gas prices.

The performance of oil and gas prices is supported by US export figures, which is favourable for the Dollar. Notably, in contrast to the historical correlation, energy is rising with the Dollar, although more often than not, a rising dollar pressures energy.

As one of the leading energy exporters, having strengthened its position, the states will economically have the most negligible impact on the economy compared with most developed countries that are net importers of oil and gas.

US dollar benefits from soaring oil and gas prices - 2

Fed can raise interest rates more quickly

Higher energy costs may not prevent the Dollar from moving somewhat up further but may strengthen it by giving the Fed carte blanche to tighten policy more forcefully. The Fed can raise interest rates more quickly, but it can also push them to higher levels without the risk of seriously hurting the economy.

WTI Crude Oil Does Not Rule Out Further Losses

Alex Kuptsikevich

Financial market professional with 16-years' experience and Senior financial analyst at FxPro. Author of daily reviews on the impact of economic events with comments regularly featured in top international and Russian media. Covers fundamental analysis, global markets, foreign exchange market, gold, oil, cryptocurrencies.

Alex Kuptsikevich is a regular contributor to both digital and print media including CNBC, Forbes, Reuters, MarketWatch, BBC and Coindesk.