01. Oil Price Decline

In the past three days, the US Dollar Index has experienced a significant drop, now falling back below 110, with the increase caused by interest rate hikes completely erased.

Since oil is priced in US dollars, a lower US Dollar Index provides strong support for the rise in international crude oil prices. However, the crude oil prices saw a substantial decline yesterday.

Yesterday, WTI crude oil was still above $92 at its highest point, but by the close, it had fallen to $88.

Brent crude oil for delivery in January next year also fell by more than $2.5, barely staying above $95, with a drop of 2.61%.

02. Reduced Demand

It is believed that the decline in oil prices is influenced by reduced demand for next year.

The US Energy Information Administration released a report showing that the demand for crude oil in the United States will significantly contract next year, leading to slow growth in crude oil production.

It is projected that the US economy will shrink by 0.1% in 2023, which is a significant revision from previous forecasts that predicted a 1.3% increase in US GDP for next year, leading to a substantial decrease in fuel demand.

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However, in the short term, there is no significant room for oil prices to fall further. Last week, US crude oil inventories decreased by 700,000 barrels compared to the previous week. Additionally, inventories of gasoline and distillates also saw a significant sequential decline.Taking into account that the release of the last batch of strategic reserve crude oil in the United States has been completed, and that there will be a need to replenish strategic reserves, crude oil will need to be purchased from the market.叠加 various factors, analysts believe that New York oil prices will soon return above $90.

The main short-term influencing factors are the midterm elections in the United States, and the results of the election will affect the Federal Reserve's next monetary policy to a certain extent.

Once the Federal Reserve reduces the magnitude of interest rate cuts, and the US dollar index further weakens, the price of crude oil will continue to rise.

03, Between a Rock and a Hard Place

Whether it's a strong dollar or rising oil prices, it's difficult for American companies. It's precisely because of this that European companies are very hesitant when considering relocation, whether to turn to the United States.

In the third-quarter report, we have already seen many American listed companies affected by the continuous rise of the US dollar index this year, among which Coca-Cola specifically described this impact.

Because many American companies have businesses all over the world, and for some companies, overseas income accounts for more than half of the company's total income.

Due to the continuous rise of the dollar, it leads to the continuous decline of other countries' currencies. We can imagine that if an American company has a branch in Japan, then the business income obtained in the Japanese market in the past three quarters, when converted into dollars, will be discounted by 30% due to the depreciation of the yen.

This is reflected in the financial report as a negative growth in business income, which in turn leads to a decline in profits.

As a result, Coca-Cola had to increase its hedging strategy for emerging market currencies.04, European Companies Hesitate to Enter the US Market

Goldman Sachs Group conducted a statistical analysis of the S&P 500 index constituents, revealing that the proportion of companies meeting market expectations has been declining quarter by quarter. In the first quarter of this year, approximately half of the companies managed to meet market expectations. This percentage dropped to 45% in the second quarter, and by the third quarter, less than 40% of the companies were able to exceed market expectations.

Currently, many European companies, facing an energy crisis, are considering relocating some of their operations to other countries. The United States is attractive due to its relatively low energy costs.

However, if the US Dollar Index declines and international crude oil prices start to rise again, the factors affecting US companies would shift from exchange rates to oil prices, which would also be a disadvantage for European companies.

The rise in oil prices leads to increased inflation, which in turn causes companies' costs to rise, and this can also drag down the performance and profits of listed companies.

Therefore, when considering whether to relocate to the United States, European companies are finding it increasingly difficult to make a decision.