Energy Prices Were Moving Modestly Lower Overnight But Bounced Immediately Along With Equity Markets

Energy prices were moving modestly lower overnight but bounced immediately along with equity markets following the March CPI estimate. That report showed that inflation continues in the US, but at a slower pace and below levels many predicted, which is causing algorithms to front run the crowd that will say the FED will have to stop raising rates based on this report.  Energy prices were a key contributor to the slow-down in inflation with gasoline and fuel oil prices both down 4% or more over the past year, while all items besides food and energy were still up 5.6% year on year.

The EIA held its forecast for global demand steady in the April Short Term Energy Outlook but increased its price forecasts slightly due to the OPEC production cuts announced in early April. The report also highlighted how OPEC’s cuts means that more market share for supply is being taken by the US and other countries. Despite the recent pullback in drilling activity, the EIA still predicts that the US will set output records over the next 2 years.

The API report Tuesday afternoon showed that gasoline and crude oil stocks had small builds of less than a million barrels last week, while distillates saw a healthy decline of nearly 2 million barrels. That report seemed to have gasoline buyers on their heels, with prices down a nickel a gallon overnight after touching fresh 6-month highs at $2.8682 during Tuesday’s session. The EIA’s weekly report is due out at its normal time this morning.

Extremely tight supplies continue across the southwestern US this week with $1/gallon+ premiums vs spot markets becoming a normal occurrence for prompt gasoline and diesel stretching from West Texas to Arizona.   

The EPA this morning proposed new “Phase 3” emissions standards for light and heavy duty vehicles, with more stringent standards for CO2 emissions. The proposed standards “Do not mandate the use of a specific technology” but the EPA makes it clear that it expects electric vehicles to continue taking more market share to meet these tighter standards. If the proposals become law, they would begin phasing in with model year 2027 vehicles and engines and it will take about that long to read through their documents.

Kevin O’Leary is making an attempt to get more people to watch Shark Tank by announcing his plan to try and find a state in the US that will allow him to build a major refinery, which would be the first new large refinery in over 50 years if this plan goes anywhere. There are no confirmed reports yet that Mark Cuban has offered to trade Kyrie Irving to his co-star to run that facility.

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