August CPI Data Shows Higher Than Expected Inflation
September 13, 2022
Energy prices rose for the third straight day, which was mainly driven by a large drop in the US dollar index, less confidence in the Iran nuclear deal, the G7 countries planning to implement a price cap on Russian oil, and oil expected to tighten after the US stops 1,000,000 bpd of oil release from the SPR in November and the EU embargo on Russian oil starts in December.
According to the Department of Energy, crude oil inventory in the US SPR fell by 8.4 million barrels in the week ending September 9th to 434.1 million barrels. The 8.4 million barrel draw from the SPR was the steepest draw since May and brings the stockpile to its lowest level since October 1984.
According to a draft document, the European Commission wants to require fossil fuel companies benefiting from the increasing energy price to make a financial contribution to help citizens and industries dealing with increasing energy cost. The draft proposal, details of which are expected to be unveil by Brussels this week, would see EU countries introduced a “solidarity contribution” for the fossil fuels industry.
The August Consumer Price Index report out this morning showed higher than expected inflation. Monthly inflation came in at 0.1%, with a negative 0.1% expected, and year over year inflation came in at 8.3%, higher than the 8.1% expected but that is below last month’s 8.5%. The Fed meets September 20-21, and this is some of the last data that they will see, and the expectation is that there will be a 0.75 percentage point interest rate hike.
A potential national railroad strike in possible as 13 unions consider a strike. The Biden administration is pressuring labor unions and freight-rail operators to agree on a new contract before a Friday deadline to avert a strike that risk distributing the supply chain and the US economy.
The struggle with the energy markets continues to be tight inventories versus fears of lower demand. The prevalent news of the moment moves the market either up or down. This market could very well continue to congest in a range, moving either up or down depending upon the news of the day just waiting for what the next big event.