Most global markets including the oil one have been significantly affected by the coronavirus pandemic. Demand for oil slumped to record lows amid the global quarantine. Moreover, uncertainties about the future are only aggravating the situation.
A weak US dollar became the only hope for oil prices. The fact is that all commodities, including oil, are denominated in the US dollar. That is why its drop lends support to oil prices.
Every trader knows that the cheaper the greenback is, the higher the price on goods denominated in this currency becomes. Thus, at the moment, the depreciation of the US dollar is the only reason for higher oil prices.
Following its monetary policy, the US Fed will hardly allow its national currency to gain in value at least until 2021. It means that commodities will continue to grind higher. The Fed's large-scale programs aimed at supporting the economy and maintaining low interest rates as well as the massive money-printing will continue to weigh heavily on the US currency for a long time. As a result, oil will look more attractive against this background.
Vandana Hari, a founder of Vanda Insights, an energy consultancy, supposes that US President Donald Trump’s efforts “to keep the US stock markets buoyant” will also boost oil prices.
