Hoping Oil Prices Will Come Down If U.S. Dollar Strengthens? Raymond James Says Fuhgedaboutit
Submitted by EnergyTechStocks.com
A new report from the Houston-based energy analysts at Raymond James & Associates warns investors not to think that the price of oil will decline if the U.S. dollar strengthens against other world currencies.
While not discounting the impact of movements in the dollar on daily fluctuations in the price of oil, the report concludes that over the long term the two are “driven by different variables and have no lasting relationship.” The rising price of oil is being driven by a number of “relatively price-inelastic” factors that are contributing to rising global demand, according to the brokerage firm.
“Countries like China, India and the Middle East have massive subsidies that insulate consumers from rising prices,” the report notes. “As such, a stronger or weaker dollar will have no effect on these consumers, who are literally driving all of the incremental crude demand. Moreover, a strong dollar cannot solve non-OPEC supply woes, defuse the Middle Eastern geopolitical risk premium, or reinflate OPEC’s excess supply bubble.”
Nowhere in their report do the Raymond James energy analysts cite a fundamental reason for oil prices to come down over the long term, thus leaving the clear impression that Raymond James sees no reason oil prices won’t continue their long-term upward march.
