Because the oil price is quoted in US dollars, the fast strengthening of that currency could lead to Brent crude oil prices hitting a low of US$20 a barrel, according to the International Business Times (IBT).
It quoted a Bloomberg report where analysts at the bank Morgan Stanley said that oil prices may fall by 10% to 15% if the dollar gains 5%.
They suggested that, while the price falling below US$60 a barrel might be attributable to the global oversupply of oil, it had fallen below the US$35 mark “due to being specifically leveraged to the dollar”.
The analysts told Bloomberg: “Given the continued U.S. dollar appreciation, US$20-US$25 oil price scenarios are possible simply due to currency.”
And, according to IBT, Brent crude prices have already fallen by close to 15% this year, and are currently at a 12-year low.
It added that a further devaluation of the yuan against the dollar is also expected to further push down oil prices.
