Energy Market Watch: 6 Key Dates in June

Summer is on the horizon for the Northern Hemisphere, and that means school breaks and work holidays. However, there is no vacation for the energy market. Check out these 6 key dates to watch in June:

June 1 – Start of Hurricane Season

Just last year, Hurricane Matthew prevented foreign tankers from delivering crude oil into most major U.S. import terminals. That forced companies to pull 14 million barrels of oil out of storage reserves, triggering a spike in global crude prices. Major hurricanes in the Gulf of Mexico can severely disrupt offshore fossil fuel production; previous hurricanes have temporarily removed as much as 5 percent of the total U.S. natural gas supply.

In short, hurricane season can still affect energy costs and spend even when it doesn’t affect local weather.

June 8 – UK General Election

On the global energy map, the U.K. plays an important role. Today, Europe offers the world’s most interconnected international energy grid with electricity and natural gas that flow across borders around the clock. Despite not being attached to the continent, the U.K. is a critical component of Europe’s overall energy stream.

The U.K. is also one of the main members of Europe’s emissions trading scheme (ETS), which is the world’s most liquid market for carbon permit trading. This and other factors have widespread energy implications, and all have a less-than-certain future following Britain’s affirmative Brexit vote. While energy interconnectivity isn’t going away anytime soon, the exact details will be part of Britain’s Brexit negotiations with the European Union.

With those negotiations in mind, Prime Minister Theresa May has sought a snap election to strengthen her mandate before she sits down again at the negotiating table. Energy markets are likely to take a front-row seat.

June 11 and June 18 – French Legislative Election

Presidential elections may get the global headlines, but one could argue that France’s June elections will actually carry more weight moving forward. That’s because while the president (now Emmanuel Macron) may be the country’s top diplomat, the legislature and the president’s appointed prime minister still wield most of the domestic political power. As a result, a supportive legislative body is critical if a president hopes to achieve his or her political agenda.

For Emmanuel Macron, that involves widespread support for renewable energy and a less than certain future for France’s significant nuclear fleet. The agenda may have been set in May, however, its likelihood of success may well be decided in June.

June 14 – Fed Meeting

The U.S. Federal Reserve takes its usual place in the monthly outlook and this time Yellen & Co. appear ready to act. After holding steady last meeting, futures markets anticipate a greater than 80% chance the Fed will raise interest rates by another 25 basis points (0.25%) at June’s meeting. Typically higher rates help to boost the dollar, making dollar-denominated commodities like oil and LNG more expensive. On the other hand, 80 percent means the market still sees a one in five shot that the Fed punts to July’s meeting, which could send the dollar lower against other currencies.

June 21 – Summer Solstice

For most, summertime means heat and heat tends to mean more energy use. To avoid sweltering and sweaty conditions, people turn air-conditioner dials up at a rate equal to the mercury in old-school thermometers rising. More AC, more “cooling demand” — the term used to denote the impact of air conditioners running overtime.

During extreme heat waves, some power grids become overwhelmed, which causes rolling blackouts or exponential spikes in wholesale electricity prices. It’s also the reason a large number of utilities have implemented commercial and residential demand response programs. These programs help decrease peak use by temporarily adjusting cooling loads, bumping thermostats up a couple degrees or cycling AC units, for example. For many companies, there is an array of options to reduce volatility and boost the bottom line through an improved energy strategy (shameless plug).

Contact us to explore those and other energy-saving opportunities. And check back next month for the dates and happenings that will set the stage for Q3.