After taking a bit of a breather the past couple of days, energy prices are being driven lower once again by a combination of rising inventories and inflation.
The API was said to report a crude build of just under 4 million barrels, while gasoline stocks increased by 4.6 million and diesel built by 1.1 which put pressure on the complex overnight.
The sell-off accelerated in the past few minutes following the often ignored CPI report, which showed the inflation gauge was a touch higher than estimated, stoking fears of rising interest rates that have roiled equity markets over the past few weeks. Futures for the Dow Jones Industrial average were pointing to a 100 point increase before the report, and are looking at a 300 point loss now, while refined products have dropped another penny/gallon. It’s worth pointing out that gasoline prices were noted as a driver of the higher inflation reading in January, so perhaps those who are panicking should relax just a bit as those prices have dropped 30 cents in the past couple of weeks.
The EIA weekly status report is due out at 9:30. Last week’s spike in crude oil production and refinery runs sent shockwaves through the markets, and will be points to watch today.
In other news, the US took the next big step as an energy exporter last week as China’s state-owned energy company signed a long term deal to buy liquefied Natural Gas from the US Gulf Coast. While the agreement is huge in both actual volume and in principle, it won’t reach its full capacity until 2023, offering little help to near-term prices that are crumbling under the weight of surging US Crude – and its byproduct natural gas – production.
The war of words surrounding the PES Bankruptcy continues to play out across the headlines this week leaving RIN values to tread water as traders await the next move by the courts, or the EPA. Values did rally last week once the government spending bill passed without a biodiesel blenders credit for 2018, but have stagnated ever since.