Blue Lacy Advisors, LLC - Crude and Products Commentary
Minneapolis, MN | November 17, 2022 | By: Steve Sinos, Blue Lacy Advisors, LLC
Crude and Products
Currency volatility continues to play an active role in crude price volatility. This has the potential to take a bit of the shine off the recent strength in crude oil prices. The dollar has been historically strong over the last 18 months or so. The St. Louis Fed’s trade-weighted Nominal Broad US Dollar Index is at record highs, trading at values testing 130 for most of the last two months. FRED’s index lags real-time estimates of USD by a week. Actively traded USD instruments suggest the dollar shows a bit of weakness, losing approximately 4% of its value (not weighted for trade), and hitting a three-month low of 106.7. USD dipped below 100 against the Euro on Friday and saw similar weakness against the various currencies the Chai model has highlighted as particularly important to crude trade in recent weeks (Indian Rupees, South Korean Won, Japanese Yen, Chinese Yuan). This is seen as bullish in the model, at least for the balance of 2022, easing some of the inflationary pressure a strong dollar causes on importing countries. The model sees currencies contributing to as much as 52% of weekly volatility, with an expected weekly range exceeding $12. Continued weakness should put upward pressure on prices, in line with the model’s estimated probability of an upward move of 54%, translating into upward pressure of >$1/bbl. from currencies. This should counter the recent negative technically driven trend. USD versus the Euro and Won are highlighted as the most significant contributors to weekly volatility.
*This summary is based off November 12, 2022
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Meet the Author!
Steve has spent his career in strategy, risk, trading, and investment. He works with investors to source investments in opportunistic or high growth sectors, with particular interest in early-stage companies solving clearly defined problems.
He is currently a Managing Partner with Blue Lacy Advisors LLC, giving management teams and investors confidence in their decision making by supporting strategic planning and execution, risk management, commodity trading, and market analysis.
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