Over the past year or so, many governments took action to support oil prices as the global pandemic caused them to crash.
A prime example was the OPEC production cuts.
Those cuts and other actions helped oil prices recover and stabilize.
Recently, however, the US dollar’s slow upward trend has finally begun to put downward pressure on oil prices.
Since a more valuable US dollar means it takes more of other currencies to exchange for one US dollar, oil prices increase in those currencies.
Thus, demand for oil drops globally — and so does price.
However, as I explained in a recent editorial, the US dollar has been going up since the beginning of this year…
But it only began to hit oil prices over the last week or so.
Other factors are hitting oil prices, too.
For one, the global coronavirus goings-on.
Europe is seeing fresh lockdowns, while at the same time vaccination rollouts are running into some problems with distribution and concerns about potential side effects.
Naturally, this indicates a near-future drop in demand for oil in Europe since they’re kicking full economic reopening further down the road.
This was seen in sharp losses sustained by US West Texas Intermediate and some other major indices at the end of last week.
Given the size of the drop, it was likely a combination of investors taking profits and new short-selling pressure from people hoping to profit off the price drop.
Additionally, oil supply is increasing slowly but surely.
Saudia Arabia’s oil exports increased for the seventh straight month to their highest levels since the pandemic’s early days in April 2020.
In particular, shipments increased from 6.495 million bpd in December 2020 to 6.582 million bpd in January 2021.
At the same time, US refiners — particularly those in Texas recovering from the crazy winter weather — are continuing to come back online and pump up output.
As a result, US crude oil, gasoline, and distillate stockpiles all grew larger.
Another thing that caused an oil price drop was a report from the International Energy Agency (IEA).
The IEA believes that global crude oil demand hasn’t yet peaked, but global gasoline demand has peaked.
In fact, the IEA Executive Director Faith Birol said, “We do not think gasoline consumption will come back to 2019 levels again.”
Oh, and the IEA revised their prediction for how many electric vehicles will be on the road by 2026.
In 2019, they said 7.2 million electric vehicles will be on the road.
Now? Nearly 60 million.
This report alone caused many to sell, of course.
Lastly, people are still watching US Treasury yields like hawks. If those increase, it carries the dollar up with it, dropping oil even further.
Overall, it’s looking like some bad days are ahead for oil prices.
But that doesn’t mean the oil market lacks opportunity for smart traders.
You can make money on any movement in price if you know what you’re doing.
For example, here at Big Energy Profits we just closed down over $14,000 in opportunities last week while the market was volatile and going down.
And there’s more of those coming, so I urge you to join today.
Click here to learn more about becoming a Big Energy Profits member!