Egypt on their minds
We have a gasoline supply at an 18-year high and a very bearish Energy Information Agency report, yet the market has Egypt on its mind. Bullish and bearish forces tugged at each other as violence erupted between pro-Mubarak and anti-Mubarak demonstrators, and the market started to fear all of those worst case scenarios. When things seemed to calm down so too did oil prices, but when things in Egypt seemed to heat up, then oil was on fire.
Of course, this situation does not help the inflationary outlook which on the oil front was set to cool off a bit. We saw the first break in retail gas prices since late November and saw U.S. gas supply surge to an 18-year high. The EIA reported that gas supply increased by 6.2 million barrels as the combination of good refining margins as well as the lack of demand from snow bound motorists helped increase supply. Gas production increased to 8.8 million barrels a day and with the Mid West shut down because of that monster blizzard supply should continue to rise in the coming weeks.
Still that does not matter as the rage in Egypt could spread and that could mean more uncertainty in the Middle East region. This rage, in part, is inflation rage which of course continues to rise.
Reuter's News reports that global food prices hit a record high in January according to the U.N. Food and Agriculture Organization, adding that prices, already above the 2008 levels which sparked riots, were likely to rise further. Up for the seventh month in a row, the closely watched FAO Food Price Index touched its highest since records began in 1990, in nominal terms, and topped the high of 224.1 in June 2008, during the food crisis of 2007/08. The index, which measures monthly price changes for a food basket composed of cereals, oilseeds, dairy, meat and sugar, averaged 230.7 points in January, up from 223.1 points in December.
Phil Flynn is senior energy analyst for PFGBest Research and a Fox Business Network contributor. He can be reached at (800) 935-6487 or at firstname.lastname@example.org.