July is the month the US celebrates its independence with a night of beautifully choreographed aerial explosions. This month’s Market Watch looks at several other sources of volatility with some expected fireworks on these 4 (and maybe 5) key dates:
July 4 – Independence Day
As is tradition, millions of Americans will celebrate July 4th with billions of dollars of fireworks. Full disclosure – this does not impact global energy markets. At least not directly. However, all the holiday driving can be an important barometer of crude prices as a gauge for summer driving demand. It can also be a reminder of macro energy dynamics at the microeconomic level: consider how many grill propane tanks across the country will be filled at slightly lower prices this year. That’s thanks to increased efficiency at America’s natural gas processing plants – a byproduct of the US shale boom.
Most of all though, Independence Day is a good time to get a handle on “American energy independence.” Energy independence tends to be one of those hot-button issues that changes form and shape to meet the needs of the politician bringing it up. But here’s the independent truth: America still imports oil, and will for the foreseeable future. However, we also export more refined products than any other country. Natural gas is a somewhat similar story where imports from Canada are a crucial source of supply, but pipeline exports to Mexico and global exports via LNG could flip the US to a net exporter.
In short, no country can ever be fully independent in today’s globally connected energy market, but the US has made significant strides in boosting the power of domestic supply. Something to keep in mind as you fire off the next Roman candle.
July 6 – Petroleum Status Report (part 1)
The EIA issues its Petroleum Status Report every week of the year, but that doesn’t mean all publications are created equal. For starters, the July 6th edition already stands out because it’s a Thursday release instead of the standard Wednesday publication. (The fine folks at the Department of Energy need a little extra time to crunch the numbers after ringing in the anniversary of American independence.) What is noteworthy is that the report is expected to close the book on the data impact of Tropical Storm Cindy, which caused a bit of volatility following June’s final publication.
July 12 – Petroleum Status Report (part 2)
No, you’re not seeing double. The often overlooked Petroleum report does, in fact, merit two distinct mentions this month. That’s because July 12th’s report will offer up the first bit of hard data on US driving over the 4th of July holiday. That will have direct impact on prices at the pump, but also on global crude prices, which eventually impacts any crude-connected product such as asphalt & diesel or even plastics.
July 29 – Natural Gas Storage Report
Oil commodity profiteers ensure that the EIA’s Petroleum Report triggers the largest trading volumes. But, the EIA’s Natural Gas Storage Report that follows has a much greater impact on the energy spend of the average company. That’s because the amount of natural gas going into and coming out of US storage facilities is essentially a weekly snapshot of the whole country’s supply/demand dynamics for natural gas. Typically these stock changes occur on a reliable seasonal pattern with large draws for winter heating made possible by steady storage injections through the rest of the year.
Last year, the end of July challenged that conventional wisdom as gas actually had to be pulled out of storage to generate enough electricity to cover air conditioners across the country running overtime. That’s what happens when the grid encounters consistently record-setting temperatures as was the case last year.
A number of factors suggest summer temperatures will once again come in well above historical averages. But before you brace the bottom line for another abnormal inventory drop (and corresponding price jump) in the EIA’s storage report, you can take some comfort in forecast models that suggest 2017 won’t match 2016’s record summer heat wave. Still, the market is likely to price in some additional summer heat risk until proven otherwise.
July ? – DOE Grid Reliability Study
Many critics contend the conclusion is already predetermined: renewable advocates fear Secretary Perry intends to boost claims that fossil fuels and nuclear should be given priority over wind and solar. Either way, the report itself won’t immediately trigger a change in federal energy policy. It is likely to form the backbone of potential policy changes in the future, though, and for that reason, will be worth a read when it’s available.