OPEC Monthly Oil Market Report – August 2017
Oil prices, US dollar and inflation
generally declined in July against major currencies but was mixed against emerging market
counterparts. The weakness of the US dollar has mainly reflected market expectation that a more gradual
pace of monetary policy normalization would be required by the US Fed in view of the slow progress of the
economic reform agenda in the US Congress as well as a weakening trend of inflation readings since
February. On average, the US dollar dropped by 2.5% m-o-m against the euro – it has dropped by 8.5%
compared to last December – and also weakened by the expectation of a sooner start of the monetary policy
normalization in the Euro-zone. On average, the US dollar lost 0.8% against the Swiss franc. The dollar also
lost 1.5% m-o-m against the British pound sterling partly due to the overall weakness of the US dollar, but
also in anticipation of some monetary tightening by the Bank of England (BoE) in view of higher inflation.
However, the BoE left rates unchanged at its August meeting, and the US dollar revered some of the July
losses in response. Against its Canadian counterpart the US dollar lost 4.6% as the Bank of Canada
increased interest rates for the first time in seven years. Against the Japanese yen the US dollar rose by
1.3% m-o-m but the majority of the gains was given back in the second half of the month.
On average, the US dollar declined by 0.5% against Chinese yuan in July. It was relatively flat against m-o-m
against the Indian rupee for the second consecutive month. The dollar declined by 2.7% m-o-m against the
Brazilian real reversing the gains of the previous month as the current government was ensured in the short
run after a vote in the country’s congress. Against the Russian rubble it increased m-o-m by 3.2% partly due
to the potential impact of a new sanctions package approved by the US against Russia. Against the Mexican
peso the US dollar declined by 1.9%, and its down by 13% since last December.
, the price of the
OPEC Reference Basket (ORB)
increased by $1.72, or 3.8%, from
$45.21/b in June to $46.93/b in July. In
, after accounting for inflation and currency fluctuations,
the ORB increased to $31.23/b in July from $30.44/b in June (base June 2001=100). Over the same period,
the US dollar declined by 1.3% against the import-weighted modified Geneva I + US dollar basket*, while
inflation declined 0.1%.
Graph 3 - 30: Impact of inflation and currency fluctuations on the spot OPEC Reference Basket price*
The ‘modified Geneva I+US$ basket’ includes the euro, the Japanese yen, the US dollar, the pound sterling and the
Swiss franc, weighted according to the merchandise imports of OPEC Member Countries from the countries in the
Nominal Reference Basket price
Real Reference Basket price
Source: OPEC Secretariat.
Base: June 2001 = 100