Energy Market Watch: April 2017

April 4, 2017 Chad Holder

Energy Market Watch: April 2017

What does the month of April have in store for the energy market and economy? A shower of important dates (and bad puns, apparently). Here are dates to circle on the calendar to stay up to speed on the market.

April 6: Natural Gas Storage Report

The Energy Information Administration (EIA) reports the amount of natural gas in storage every week, but that doesn’t mean all reports are created equal. After heavy seasonal heating demand for natural gas, the first report of April typically marks a shift away from winter withdrawals and tends to see storage levels rise. While the direction may be predictable, the magnitude of those changes tends to bring a bit of uncertainty — doubt that has wide-reaching implications.

Gas storage levels coming out of winter will guide forecasts of just how much supply is likely to be available in the US as air conditioners kick into summer overdrive. If the April 6 report can set the tone for a month of above-average storage injections, the price of natural gas will likely fall (and vice versa). That means cheaper gas, cheaper power and an overall lower cost of energy for many US markets.

April 18: Tax Day in the US

Tax formsSay what you will about Uncle Sam, but in 2017 he’s been kind enough to provide three extra days to procrastinate in filing federal income taxes. Still, despite the pending, sweat-inducing deadline, individual filings aren’t much concern when it comes to energy markets. However, corporate taxes loom large on the radar.

Heading into April, the consensus is that federal politics may shift their attention to tax reform and the stakes couldn’t be much higher. Beyond changing specific rates, there has been growing support for more significant changes, such as a shift to a “border adjustment tax.”

To grossly oversimplify, a border adjustment tax would encourage US domestic production and discourage foreign imports. For energy that could mean a number of major changes, including:

  • Higher oil production
  • Cheaper natural gas
  • Increased prices at the pump for gasoline and diesel

Of course, any major change to federal tax policy is difficult (to say the least), but the markets — whether equities, energy commodities or currency — will certainly pay close attention to the debate.

April 22: Earth Day

Green Energy InfographicCompared to taxes, Earth tends to enjoy quite a bit more support. Started more than 40 years ago, Earth Day is now officially recognized in almost every country on…well, Earth. In 2016, it was especially noteworthy as it marked the day that many countries signed the COP21 Paris agreement. The agreement, though largely symbolic, has been an important step in a growing global effort to address the potential climate impact of increased CO2 and other emissions.

However, since the US added its signature, a new administration has moved into the White House and climate policy has changed. On this Earth Day, expect the world to keep a close eye on how the US decides to commemorate the event.

April 28: GDP Numbers

The release of gross domestic product (GDP) numbers has been mention in a few past editions and for good reason. GDP is often hailed as an all-encompassing look at the economy, with energy markets forming an important piece beneath that broader umbrella. Shortcomings of a heavy GDP focus aside, the data tends to send a signal to the public on just how well the gears of the domestic economy are turning. For energy, GDP can sometimes be an important indicator of consumption (think gasoline and diesel demand).

In other cases, GDP numbers are only slightly related to actual usage (see electricity demand). It can also be intriguing to watch those relationships evolve over time, such as the International Energy Agency’s findings that global CO2 emissions have decoupled from GDP growth in recent years. Energy has a vital and ever-evolving role in the broader economy and the US will report its latest benchmark figure near month’s end.

April 28: Petroleum Supply Monthly

Even among those who spend their days trading oil futures, the EIA’s Petroleum Supply Monthly report has sometimes flown under the radar. But that’s hardly the case these days as the report tends to serve up the industry’s most reliable update for US oil production levels. Those figures have been in hyper-focus of late due to an ongoing deal by OPEC and several non-OPEC countries to cut production in order to lift global prices.

Pipeline in industrial districtThat effort has faced some serious headwinds out of the US as shale producers look to pick up OPEC’s slack. In fact, since bottoming out in mid-2016, US production has successfully added more than 700,000 billion barrels per day. As a result, oil prices and connected costs such as gasoline and diesel have generally retreated from gains they made in the aftermath of OPEC’s announcement. With OPEC still looking to rebalance the world’s oil supply, the market is wondering just how much further US production growth can go. On April 28, that answer is set to become a bit clearer.

And what will happen once May comes into bloom?

Check back next month or reach out to an analyst for insight.

The post Energy Market Watch: April 2017 appeared first on Schneider Electric.

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