Will the Fed put a bottom on crude?

The Federal Reserve starts its two-day meeting today and what they do could determine crude oil's ultimate fate. The Fed has made oil go up with QE 1 and QE 2 and QE 3 and are helping it go down as it threatens to raise rates while the rest of the globe is going in the other direction. The Fed is going to need the luck of the Irish if they want to raise rates without sending the dollar soaring and putting a dent in the earnings of U.S. corporations.

Oil prices yesterday succumbed to roll over pressure as traders are starting to get active in the May contract but also a very bearish Genscape report. Advisory service Genscape is reporting that supply into Cushing, Okla., increased by more than 3 million barrels. Yet, with a soaring dollar and the Fed losing patience with the word patience, is today the day that oil hits the bottom?

We know one main reason that oil tested that low again has been the soaring dollar. The Fed today may start to show some worries about that factor. The United States is on the losing side of the currency war right now and if the Fed fails to show any concern it could mean more downside pressure on oil. Yet, there is a lot of talk about the Fed being worried about the real jobless rate. Not the one we hear about each month--but the real rate. 

While the unemployment rate has fallen to 5.5% the underemployment number still hovers around 11%. Fed Chairperson Janet Yellen has shown some unease with that situation. The lack of strong wage growth still shows some slack in the labor market and the possibility that U.S. corporations hiring could be hurt by exchange rate headwinds and could make the Fed think twice about dropping the word patient because the weight of the word is being carried on the dollar's back.

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About the Author

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor.