by frog
Oil took a violent swing upwards at the close of business yesterday, as a collapsing US Dollar and an expiring long-term crude oil contract led the market to believe that one of the big fund managers was being caught short. To translate – the market smelled blood and everyone jumped in.
Despite spiking to $130, it is currently trading at $109, which is a fairer reflection of the US Dollar’s loss of value. Will it cost us at the pumps? In a word, no. Our dollar rallied as a result of the $US slump, pretty much cancelling out the price surge.
However, our dollar is in a long slow slide back towards its long-term average, which so far has protected us from the worst of this year’s price spikes. That slide is forecasted to continue, which means we should see a slow rise or relatively stable petrol prices for the near term.
The petrol price rise will come if our dollar gets sold off in a hurry, either from bad local economic news, or because of automatic selling by traders. Our dollar’s spike overnight has put it just above its 4 week rolling average, which many traders use to trigger a sell off.
We’ll have to wait and see. The one thing we can count on is continued volatility, for both our dollar and oil prices.
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