Inflation Remains Stubbornly High In The US With Prices Increasing .4% For The Month And 3.5% For The Year

It’s a mixed start for energy markets Wednesday with small moves in either direction as inflation and inventory reports take center stage.

The March CPI reading showed that inflation remains stubbornly high in the US with prices increasing .4% for the month and 3.5% for the year. Gasoline prices are starting to push inflation higher, after acting as a key price deflator for most of last year. Equity futures are pointed sharply lower following that report as it all but guarantees the FED will not cut rates in the next few months.

In 2022 it was easy to pin the blame for high gasoline prices on Russia, but this year the administration is having to walk an awkward tight rope of “politely” suggesting the it’s Ukraine’s fault. Ukraine meanwhile continues to suggest that unless the US’s polite requests come with Patriot Missile batteries or about a million howitzer shells, they really don’t care.

The API reported gasoline inventories declined by 600,000 barrels last week, while distillates saw a small increase of 120,000 barrels and crude oil stocks increased by 3 million barrels. The EIA’s weekly report is due out at its normal time this morning.

Yesterday the EIA’s Short Term Energy Outlook increased the forecast for gasoline and crude oil prices this year, primarily due to increases global demand that were previously underestimated. The agency also is calling for US natural gas prices to rise from here as producers cut back after prices touched record lows in February.

After a brief pullback, California gasoline differentials are on the rise once again, with Bay-area premiums approaching $1/gallon over futures after one of the 4 remaining refineries in the region completed its conversion to renewables, which removes a key supplier of gasoline from the market and Chevron’s Richmond refinery reported a flaring incident.. LA spots were following their lead bouncing more than a dime on the day to a 49 cent premium to futures following multiple flaring notices at Marathon’s Carson refinery this week.

P66 reported another upset at its Borger TX refinery that’s been a frequent flier in the TCEQ filings this year ever since the January cold snap caused damage to several units. Speaking of which, Total reported they were forced to shut down an operating unit at its Pt Arthur TX refinery that’s been struggling with various operational issues ever since the freeze.

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