Trish Regan’s Market Notes: Colonial Pipeline Attack Prompts Supply, Inflation Fears

Gasoline futures surged as suppliers are growing nervous about a potential fuel shortage in the eastern U.S. after a ransomware attack knocked a key pipeline out of operation for the third day.

Colonial pipeline, which supplies 45% of the East Coast’s diesel, gas, and jet fuel, sustained a critical cyberattack on Friday, putting it out of operation for the third day so far.

The hacker group “DarkSide” was blamed for the attack. According to cybersecurity experts, DarkSide extorts companies by encrypting user data, making it inaccessible, while also threatening to release the data to the public.

colonial pipeline
Colonial Pipeline
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To help prevent a shortage, the US government issued an emergency waiver relaxing the rules on fuel transportation by road and says it is “all hands on deck” as the administration works with Colonial to address the security issue.

Amid concerns over supply shortages, West Texas Intermediate and Brent both rose as gasoline surged as much as 4.2%.

The supply issues will only exacerbate inflation fears, and oil is just one of the commodities that are experiencing supply shortages, depleted inventories, as supply lines are being stretched thin to meet rising demand fuelled by easy money.

Copper, Iron Set New Records

Commodities just don’t stop surging. Inflation fears, rising consumer sentiment, and covid-19 recovery are pushing prices faster than ever to record levels.

Following the trend from last week, iron ore prices surged more than 10% on Asian markets to $220 a ton. Copper surged to record levels, rising as high as $10,440 on London markets.

Steel, iron and cooper all surpassed their 2011 records in the past few days, as Fed’s easy money made its way to the commodities market.

Prepare for the Inflation Tax

CPI data will be released this Wednesday, and investors will be watching. With skyrocketing commodity prices and continued easy money policy, inflation fears have become mainstream.

After stocks, real estate, digital assets and commodities, consumer prices are next in line.

For example, the price of corn has risen 142% in the last 12 months. Since corn is used in hundreds of different food products, it’s easy to see how this will eventually lead to more expensive groceries.

Ultimately, all money printing trickles down to consumer prices. This is very bad news for everyone who did not benefit from Fed’s asset pumping.

That’s why the poor will be hit by the inflation tax the most. How’s that for a “fairer tax system?”

Nasdaq Flops as Tech Stocks hit by Inflation Concerns

Nasdaq futures dipped as tech stocks were hit by inflation prospects. Higher inflation can hit longer-horizon revenues typical for the industry. S&P futures increased 0.1%.

Bond yields studied traders brace for a busy week of auctions. 10-year U.S. Treasuries dropped less than one basis point to 1.58%.

Driven by supply shortages and gold strengthened by 0.5% to $1,839.50 an ounce. I called for $1800 months ago and my new expectation amid increasing inflation is $2000 per ounce.

The Bloomberg Dollar Spot Index dipped 0.1%.

Final Note:

I said to buy oil ten months ago as the would would eventually recover from coronavirus and fuel prices would move higher. I’ve predicted oil would reach $75 -$100 dollars a barrel by summer… yet, those assumptions didn’t take into account this Colonial Pipeline system attack. Oil will move up higher and faster as a result and it’s increasingly clear: we need this administration to update the electric grid. We are becoming increasingly vulnerable to bad actors in this brave new world and it’s simply not acceptable. 

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