Energy Futures Ticking Modestly Lower

Energy futures are ticking modestly lower to start Wednesday’s trade, following equity markets into the red without yet threatening the upward trend. The correlation of daily price moves between the S&P 500 and petroleum futures remains strong (close to 90%), even as the relationship between moves in the U.S. Dollar and energy contracts has fallen apart in recent weeks.  

Gasoline is leading the move lower this morning, pulling back from the 11 month highs set Tuesday, after the API reported an increase of three million barrels of gasoline inventory last week. That report also showed a build of 1.4 million barrels in distillate inventories, while crude stocks dropped by 5.3 million barrels. The EIA’s weekly report is due out at its normal time today.

The Fed’s Open Market Committee wraps up its first meeting of the year today. The market is pricing in zero percent probability of an interest rate change at this meeting, and in fact, is not expecting a change until September at the earliest, according to the CME’s Fedwatch tool based on assurances from the Fed leaders. With so much focus on fiscal stimulus in Washington, it’s hard to imagine the FED saying anything today that would suggest a pullback in Monetary stimulus, and reassurance of that stance seems to be what the bulls need to hear today.

The CME Group (parent company of the NYMEX, CBOT AND CBOE exchanges) is jumping on the carbon credit trading bandwagon, with plans to launch an emissions offset futures contract in March. The move by the CME adds yet another to a long list of various emission program contracts, and comes at a time when the exchange’s most popular offering – WTI crude oil futures – are coming under pressure from competing contracts based in Houston.

A new way for refiners to cut emissions (and costs?): Flint Hills is reportedly analyzing adding a large solar farm to its MN refinery complex to help power the plant’s operations.

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