WTI Crude Oil - US dollar Index

WTI Crude & USDX

Crude has been a topic of discussion for some time with many countries particularly Oil producing ones feeling the pain of the low price. If Crude stays at around 40 levels till the end of the year or more, it could result in serious trouble for Russia, Iran, and a few others. Most analysis has been with reference to Saudi wanting to take on Russia in the Oil Market and Iran which wants to be the regional power in the Middle East which is not to the liking of the Saudis.

The problem with Crude staying at low prices upsets the budget of most oil producing countries which need crude to be at around 80 plus USD to be able to balance their budgets. Current prices would make huge holes in their budget leaving them with big deficits.

I feel Saudi and US are being unfairly targeted because markets drive prices. Since 2008 Crude has made an attempt to move back to 120 plus USD region but failed. At some point profit taking was likely to happen.

Saudis would not like to keep the prices at these or lower levels for long, so is the case also with the US. US is comfortable for the next few months due to storing oil and gas, but US itself needs oil prices to be above 50 USD to support its Shale gas and oil Industry which eventually will get effected if prices stay at these prices.

There is also another line of thought which believes the Saudis are squeezing out competition including the US Shale Oil and Gas companies.

Whatever the case, the current situation is most serious because if crude stays at these prices till around the end of the year, we could have unwinding of positions on other markets. Oil Producing countries would have to unwind positions in Real Estate and Stocks to meet their spending's. This could lead the stock markets to crash globally.

Have attached Charts of USDX (US Dollar Index and Crude). Maybe we are near the bottom. USDX is in overbought territory as can be seen from the RSI. If the price of 92 in US Dollar Index holds we can see some correction in crude possibly to above 52.