Energy Market Watch: Thanksgiving Edition

November 2, 2017 Chad Holder

Energy Market Watch: Thanksgiving Edition (November 2017)

It’s that time again. This month’s Market Watch is your digital cornucopia of news and notes on events that are sure to impact energy markets in November. It’s a full plate, as usual.

Nov. 4-16: President Trump in Asia 

Japan, Korea, China Sea and vicinities in a small desktop globePresident Trump will meet with leaders in several countries, including Japan, South Korea and China. North Korea’s nuclear program is likely to dominate the agenda, but energy should also be on the radar.  As the U.S. steadily expands its ability to export liquefied natural gas (LNG), Asia is expected to be the main source of new LNG demand. That ties in well with President Trump’s plans to grow U.S. energy exports and has already been a topic of discussion between the Trump administration and Chinese officials.

Links like these between U.S. energy prices and the Chinese energy market are set to gradually rise over the years ahead.

Nov. 23: Thanksgiving (U.S.)   

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While you’re pouring gravy over stuffing, the world’s energy analysts and traders will be poring over numbers. Thanksgiving is a big deal for energy because it represents a huge spike in travel demand across the U.S. That travel requires energy — usually in the form of gasoline, but also diesel, jet fuel and increasingly even electricity.  The significance of that spike typically depends on a number of factors, including the price at the pump, the state of the overall economy and weather conditions on key travel routes.

Ultimately, if that travel demand impresses the market, it’s likely to support the cost of a wide range of things linked to crude prices. However, if holiday travel disappoints, it can leave more refined products stuck in storage until demands start to tick higher heading into summer.

Nov. 29: U.S. GDP    

Stock market concept with oil refinery industry background,Double exposure.

U.S. gross domestic product (GDP) is in a select group of indicators that always has the potential to move global markets, but that doesn’t mean all reports are created equal.

November’s GDP figure actually takes on some additional importance as the Federal Reserve is expected to raise benchmark interest rates in December if all goes according to plan with November’s GDP number. Additionally, U.S. GDP growth has looked strong of late, providing fuel to a stock market rally and helping to define target growth expectations in ongoing tax negotiations.

Nov. 30: 173rd OPEC Meeting    

If conditions at the end of October can hold, OPEC will head into its next major meeting with oil prices at their highest level in more than two years. By that measure, it’s reasonable to conclude that OPEC’s deal to cut supply — which went into effect at the start of the year — has been largely effective.  Combined with several other factors, the deal has successfully pulled global oil and product inventories lower and sent prices higher bringing some much-needed relief to OPEC member budgets.

What’s less clear, though, is how the cartel should proceed now that the deal actually seems to be working. As it currently stands, the deal will expire next March. However, most members support extending that end date, potentially through the end of 2018. With current efforts apparently working, that seems to make sense. But OPEC is also exceedingly weary of sending prices too high. That move could eventually trigger a wave of new supply from the U.S. and others and send prices plummeting lower once again.  That’s why the stakes are especially high for most things energy and will command heavy attention as any details emerge.

***

Hope you saved room for seconds as December is sure to be just as bountiful. Be sure to check back next month to find out. In the meantime, connect with our team of analysts if understanding and navigating the energy market leaves you in a bit of a daze. (It’s probably all the tryptophan.)

 

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