Inflation Rose Higher Than Expected in March
April 11, 2024
The Consumer Price Index (CPI) for March 2024 rose more than expected at the higher end of the ranges expected. The core CPI rose 0.4% in March versus February and 3.8% in March 2024 versus March 2023. These inflation numbers will give the Fed less incentive to cut rates any time soon unless other inflation indicators are much lower. There have been comments that the Fed may actually need to raise rates.
The DOE inventory report had crude oil up 5.842 million barrels and total stocks are now 2% below the five year average. Gasoline inventories were up 717,000 barrels and are 3% below the five year average. Distillates were up 1.657 million barrels and are now 5 % below the five year average. Propane inventories were down 105,000 barrels putting total stocks at 9% above the five year average.
The Panama Canal is going through a 9-day maintenance starting in mid-May on its Panamax locks, which are responsible for 70% of all ship traffic at the canal, according to Argus. Traffic will still be allowed through, but at a reduced rate. Despite the Panama Canal being a vital artery for some energy exports – most notably LPG – this shouldn’t have a major impact on those markets, assuming all goes smooth with the project. The backlog of ships looking to transit the canal has dwindled recently. In fact, the average cost for ships to win an auction to transit the canal hit its lowest level this year on Monday. That cost was $94,000 down from a high of $450,000 ahead of the lunar holiday in February. In addition, the rainy season is set to startup, which should keep traffic flowing. The canal has been low on water due to drought and many ships have likely taken another route helping to reduce traffic. Let’s hope the rainy season provide enough water to get lake levels that feed the canal back to more comfortable levels.
The energy markets seemed to brush off the bearish inventory report yesterday and the higher CPI than expected and the market closed higher. But today traders are taking prices lowers as the two factors mentioned above seem to have finally sunken in for traders. So far, this pullback is being seen as corrective in nature after an impressive run higher these energy markets. The bulls do have some room for price to sell off and still see a longer term upside, but traders will be watching support levels, and the bulls will need to rally prices from those levels.