US Inflation 4.9% in April, EIA Expects Lower Summer Pump Prices

Refined products have turned overnight losses into small morning gains in the wake of the April CPI report that showed annual inflation just under 5% for the past year, with energy prices the key force keeping prices in check.  The 2nd bounce from early losses in as many days keeps the recovery rally intact, with both gasoline and diesel picking up nearly 25 cents since bottoming out last Thursday. 

The EIA lowered its forecast for fuel prices in the latest short term energy outlook predicting that retail gasoline will be 20% lower than last summer, even though prices in April rallied above prior estimates.  

The EIA expects the 2nd highest natural gas consumption on record for the US this summer, trailing only last year’s demand as the agency revises its forecasts to include warmer weather outlooks from NOAA. 

The API reported a build of 3.6 million barrels of crude oil in the US last week, while distillates saw a decline of 3.9 million barrels and gasoline saw a small increase of less than 400,000 barrels. That report seemed to have put a bit of downward pressure on crude prices, but doesn’t seem to be impacting products, with distillates trading lower most of the overnight session despite the draw. The DOE’s weekly report is due out at its normal time this morning.

Party’s over for shippers? A Bloomberg article Tuesday highlighted the dramatic collapse in oil tanker rates since OPEC’s output cut announcement in March. 

While the D4 and D6 RINs that make up the majority of trading have gone nowhere for the past 2 months as traders await the EPA’s final ruling for the RFS in the coming years, D3 cellulosic RINs have seen a healthy recovery following a Reuters report last week that the EPA may delay plans to allow electric vehicle makers to generate “eRINs”.   

If you go to the RFS overview on the EPA’s webpage (which pretty much no one does) you can see that this law set a congressional target of 16 billion gallons of cellulosic biofuel blended by 2022, and in reality, less than 1 billion gallons was produced last year, which was the main reason the plan is barely reaching half of its mandated levels today. See tables below.

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