Falling oil and gasoline prices, along with the rest of the energy complex, helped to slow down the annual rate of inflation in August. According to AAA data, gasoline prices averaged $3.253 per gallon on Wednesday, down from $3.445 a month ago and $3.832 a year ago. According to Bureau of Labor Statistics data released Wednesday, the gasoline index declined 0.6% last month, compared to a rise of 0.1% in the prior month, with gas prices falling 10.3% on an annualized basis while the energy index dropped 4%. Consequently, falling energy prices have helped tamp down headline inflation: the Consumer Price Index (CPI) rose 2.5% over the prior year in August, a considerable drop from July's 2.9% annualized clip.
However, oil prices edged up slightly on Wednesday after several oil and gas producers operating in the Gulf of Mexico suspended operations as Hurricane Francine bore down on the coast.
According to the Bureau of Safety and Environmental Enforcement (BSEE), personnel have been evacuated from at least 130 platforms, leading to the loss of about a quarter of all oil and natural gas production in the U.S. Gulf of Mexico, or 412,070 bopd of crude oil and 494 MMCFD of natural gas. The Gulf of Mexico accounts for about 15% of all U.S. oil production and 2% of natural gas output, according to federal data.
It's not clear if oil prices will be able to build any kind of momentum from the latest shutdowns. Hedge funds and other money managers have turned the most bearish on crude ever since the CFTC started to publish information on market positioning, with speculative positioning in crude oil currently extremely short. Indeed, net speculative long bets across the four Brent and WTI contracts clocked in at a mere 2.3% of open interest, the lowest level going back to the start of 2011 and 2 percentage-points below the pandemic-era low.
By Alex Kimani for Oilprice.com
Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. More