As the pricing currency of international crude oil prices, the U.S. dollar has a much greater impact on crude oil prices than other currencies, such as the euro, the Japanese yen, etc. Changes in currency exchange rates will also affect crude oil price trends. Theoretically, when the U.S. dollar index weakens, the price of crude oil priced in U.S. dollars appears cheap from the perspective of euros or yen, and demand will increase; conversely, when the U.S. dollar appreciates, the price of crude oil priced in euros or yen If it is more expensive, the demand for crude oil will decrease.

From a statistical point of view, there is a strong negative correlation between the price of WTI light crude oil and the US dollar index. Monthly statistics show that the correlation coefficient between the price of WTI light crude oil and the US dollar index is negative 0.82. We are more concerned about the mechanism of the formation of this negative correlation? Is it because the depreciation of the U.S. dollar causes an increase in global demand for crude oil, resulting in an increase in prices? Or does the increase in the U.S. dollar price of crude oil cause the U.S. dollar to depreciate?

Analysis This issue still needs to be analyzed from the perspective of the impact of crude oil producing and consuming countries on the fluctuation of the US dollar exchange rate. Of course, this analysis is certainly not comprehensive. After all, crude oil as a commodity is not only affected by global economic fundamentals, but also has a huge system. Financial markets such as crude oil futures trading, etc. will also react on the spot price of crude oil.

International crude oil transactions are priced in US dollars, and consumers in various countries purchase crude oil products in their own currencies. Crude-producing countries sell their oil for U.S. dollars and use other currencies to buy goods and services from other countries around the world. For OPEC members, this situation is even more serious, and the impact of dollar depreciation varies greatly between countries. International crude oil companies sell their crude oil products in U.S. dollars and pay wages, benefits, taxes, and various other expenses in local currencies. When the dollar depreciates, countries that appreciate against the dollar can buy cheaper crude oil, while countries that are pegged to the dollar cannot benefit from crude oil imports.