Falling oil and gasoline prices and the rest of the energy complex contributed to slow the annual inflation rate in August. According to AAA dataGasoline prices averaged $3.253 per gallon on Wednesday, compared with $3.445 a month ago and $3.832 a year ago. According to Bureau of Labor Statistics data released Wednesday, the gasoline index fell 0.6 percent last month, compared with a 0.1 percent increase the previous month. On an annual basis, gasoline prices fell 10.3 percent, while the energy index fell 4 percent. Consequently, falling energy prices have helped to dampen overall inflation: The consumer price index (CPI) rose 2.5 percent in August from a year earlier, a sharp decline from the annualized reading of 2.9 percent in July.

But oil prices torn open fell slightly on Wednesday after several oil and gas producers in the Gulf of Mexico suspended operations as Hurricane Francine headed toward the coast.

According to the Bureau of Safety and Environmental Enforcement (BSEE), personnel were evacuated from at least 130 platforms, resulting in the loss of about a quarter of the total oil and natural gas production in the Gulf of Mexico, or 412,070 barrels of crude oil and 494 million barrels of natural gas per day. The Gulf of Mexico accounts for about 15 percent of total U.S. oil production and two percent of natural gas production, according to federal data.

It is not clear whether oil prices will gain momentum from the recent shutdowns. Hedge funds and other asset managers are more bearish on crude than ever since the CFTC began Publish information on market positioning, with speculative positioning in crude oil currently extremely low. In fact, net long bets on the four Brent and WTI contracts were only 2.3% of open interest, the lowest level since early 2011 and 2 percentage points below the low during the pandemic.

By Alex Kimani for Oilprice.com

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