WTI falls precipitously as the markets react to the US CPI

Following the release of US consumer price index data and during the opening of Wall Street's cash market, crude oil prices in the United States continue to plummet. At the time of writing, West Texas Intermediate crude oil was down 1.4% on the day, up marginally from the lows of approximately $77.69 per barrel but far below the highs of USD79.80bbls.

The US inflation report was slightly higher than anticipated, prompting some concerns about future oil and fuel consumption in the world's largest oil consumer. However, Fed swaps show that the predicted funds rates for 2023 would not move significantly as a result, which originally weakened the US dollar.

Prior to the release of the data, markets anticipated that the Fed's target rate would peak in July at 5.188%, up from its current range of 4.5% to 4.7%. Fed funds futures are now pricing in a top-fed funds rate between 5% and 5.25 percent by July, as opposed to the near-even probability of a higher fed funds rate previously expected. However, the US dollar rose as markets began to process the data, which has also weighed on the price of oil.

The actual month-over-month data for the US Consumer Price Index was 0.4%, which was in line with estimates of 0.4%. Meanwhile, the US CPI for the year in January came in at +6.4% compared to +6.2% predicted.

Notably, TD Securities analysts explained that CTA trend followers are marginally adding back their short positions in Brent crude following news of congressionally mandated SPR sales worsened sentiment in the energy complex.

Current prices indicate a significant selling program equivalent to -9 percent of the cohort's greatest historical position size for RBOB gasoline. Nonetheless, the trend in time spreads indicates a tightening of the physical market in the near future, as evidence of a demand surge from China's reopening is visible in the travel industry.