Weekly Bitumen Report: The Equity of US Dollar against Euro after 22 Years and its Effects on the Export

As it was mentioned in our last week analyses in June 2022, the average of WTI and Brent observed a recession after six month that was a sign of control over oil price.

In July, oil prices started at the level of 113 US dollars but from 5 July onwards, the fears in the financial, investment, and commodity markets about another increase of interest rate in the US, the oil price initially dropped around 8% and again since Tuesday, 12 July, another fall happened and the price reached less than 100 US dollars and till the time of preparing this report, oil price closed at 97.79 US dollars.

The reason of facing another fall of oil price roots in the highest level of inflation in the USA within the last 40 years. To control this inflation, the government decided to increase the interest rate in June. The increase of interest rate as well as empowerment of US dollar against other reliable currencies led to the equity of US dollar against Euro after 22 years.

On 14 July, 1 US dollar was equal with 80.20 IN Rupees that can be considered the highest rate during the last years.

By the empowerment of US dollar against other currencies, the importers have to evaluate whether the import rates are economical comparing to the prices of goods produced in their countries.

The world is facing with some questions like: whether oil price might come to a lower level? Does interest rate of the USA increase more? Is there any possibility on more changes of the equity of the different currencies?

If the USA decides to increase the interest rate in July, oil price might fall accordingly. The answer to the equity of US dollar against other currencies depends on the policies of central banks in each country and we cannot talk about it easily.

Generally, considering monsoon season, empowerment of US dollar, and fall of oil price, maybe it can be stated that the current monsoon was the most difficult one in the last years.

The current complexities of the world have found more importance and less attention is being paid to the war of Russia- Ukraine and it is no longer among the top news, while it seems that they are facing a very complicated situation too. The military assistance of the Europe to Ukraine and the secret purchase of oil from Russia by the Europe have caused a more complicated war in that region.

However, the USA president traveled to the Middle East on 13 July to experience his first visit in the Middle East after 18 months of his presidency. He had met the heads of Saudi Arabia with the purpose of their persuasion to increase oil production. It is not clear whether after this visit and his return to the USA, there will be any positive solution for energy crisis and the passage of time can determine it.

In the current situation, the complexities of JCPOA issues and its dead ends should be noted too.

In addition to the above matters, the outbreak of COVID-19 in the world should be taken into consideration. The complex of all these facts has caused the most difficult years of the current century.

In the market of petrochemicals, both suppliers and buyers are passing an ambiguous situation and still the best technique to reserve the funds is to have a proper supply according to the available demands and to avoid from long-term investment.

This article was prepared by Razieh Gilani, the export manager of Infinity Galaxy (www.infinitygalaxy.org).