Inflation Pressure & Geopolitical Threats Shake Oil Complex

In what should have been the start of a nice 3 day pullback yesterday, turned into a resetting of ideas.  While not long term positive news, morning reports of Inflation figures up sharply for March was putting pressure on the Oil complex most of the morning.  Inflation numbers were reported for March to be on an annual pace of 3.5%, higher for core inflation (takes out food and fuel) at 3.8%.  This pretty much confirms the FED will leave rates high through the summer months, which should ease future pricing.  Additionally, the 10am Inventory report showed gas and diesel storage was up slightly, demand for both products remain down year over year.  Gas is off by 3.6% and diesel a whopping 21% lower over last year.  While some can be attributed to weather, those are some strong numbers to overcome.  By 1pm the mood shifted drastically as the news of an “imminent and serious” threat from Iran towards Israel in retaliation for last weeks bombing of the Iranian consulate in Syria began to cover the marketplace.  The overall concern is what players get dragged into this conflict and to what extent.  Moreover, what this does to overall fuel production on a world level.  Traders appear to be jumping on the train that US product will be exported and judging the recent figures that showed gas and distillate exports up 15% and 38% respectively, I would say that’s the right call for now.  Still we remain in the range of the few months although that dip to the low side seems less likely today.  Things change quickly, keep lines open with your Rep to stay up to date.

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