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Yesterday’s Double Digit Losses Are Followed By Double Digit Gains Today

Wednesday, May 4 2022
Market Talk

Energy market whiplash: yesterday’s double digit losses are followed by double digit gains today. Official news that the EU plans on completely banning Russia energy imports is taking credit for today’s rally, despite that news being a day old. Maybe the change in language describing the timing of the embargo from “by the end of 2022” to “in the next six months” sparked some additional concern this morning.

An anticipated decrease in energy inventory levels last week certainly isn’t doing anything to reign prices in this morning. The American Petroleum Institute published an across-the-board drawdown in their inventory estimates yesterday afternoon. Eyes will be on the DOE’s version of the report, scheduled to be released at its normal time this morning, to see if the API’s ~3.5 million barrel drop in oil stocks and the ~4.5 million barrel drop in refined products will be confirmed.

This month’s Federal Open Market Committee meeting is today where a 50 point interest rate hike is all-but-certain. In addition to bumping borrowing rate by twice the usual amount, more rate increases are expected in the coming months as the Fed tries to curb inflation, currently at a 40 year high. While the long term effects are uncertain, some view the rate hike as a “de-risking” event and anticipate a decrease in short-term volatility and an accompanying rally in equities in the short term.

Soybean Oil prices, and likewise biodiesel RINs, have back off from multi-year highs this week but still remain in the stratosphere as the world grapples with a shortage of edible oils. It’s a similar story with corn futures and ethanol RINs so far this week and while this might be great news for farmers, high blendstock prices aren’t doing anything to help bring down prices at the pump.

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