October is a bit of transition month. Summer in the northern hemisphere is officially over, cooler temperatures are moving in and daylight savings time is nearing its end. (For many, that means an extra hour of sleep is on the horizon (big shout out to America’s early farmers on that one!)) Keeping the focus on October, however, it also means Halloween is fast approaching, with many consumers still in the market for the right costume. Pro tip: If energy price is a common concern and preference leans toward something scary, try dressing up as a “Hawkish Janet Yellen” or “low natural gas storage injections.” Admittedly, the latter may require a bit of creativity.
In any event, here are the dates and data worth circling on this month’s calendar.
October 7: Employment Situation
October brings up a topic that’s kept everyone’s attention for essentially all of 2016 — rate hikes. Despite all the unpredictability, painstaking analysis confirmed no rate change in October (mostly because there’s no official meeting this month). However, that doesn’t mean we skip ahead to November just yet. All signs continue to point to a potential December rate hike, but if the market is going to get there, it will largely be from some helpful October data. Enter the Employment Situation Summary from the U.S. Bureau of Labor Statistics, which shows the usual look at all things jobs. The Fed wants to see things trending in the right direction if they’re going to push rates higher, and that means favorable numbers for things like unemployment and labor force participation rate. Side note: for a refresher on why this is a big deal for energy markets check out this previous article.
October 9: Second Presidential Debate
The first round of Trump vs. Clinton is in the books. It accomplished a great deal, not the least of which was getting 84 million people to watch politics instead of Monday Night Football. While there are no shortage of policy differences between the two candidates, energy is among their most polarizing topic. Those divides extend to their own parties and can cause some difficult political positioning.
For Donald Trump, while he has expressed skepticism of man-made climate change, he represents a party whose members (according to the latest polls) are essentially split down the middle on the issue. Meanwhile, Hillary Clinton’s Democratic Party backed putting a price on carbon in the official national party platform, but Clinton herself has been less enthusiastic on the subject. Those differences are often put under a spotlight in a debate setting. This year, energy policies will perhaps have more impact than ever on undecided voters and the candidates will take notice. Look for energy to be a key discussion point.
October 12: FOMC Minutes
The employment situation might offer the best look at the Fed’s future, but the release of the Federal Open Market Committee (FOMC) meeting minutes are the best look at the past. Because hedge funds and big banks get a little emotional for all things Fed, Yellen & Co. prefer to let things settle down before they offer up their meeting minutes. On Oct. 12, the Fed releases the minutes from their September meeting, providing insight into the questions the members have. Questions such as, “Should we wait until after the election to act?” or “Is the current economy sustainable?” And, most importantly, “If we turn rates negative, does MasterCard pay me?” Answers to all (or maybe none) of these questions due up soon.
October 28: GDP Data
Forget the Fed, gross domestic product (GDP) is a big piece of a rate-hike decision, but the impact doesn’t stop there. This is the final big release of GDP data heading into an even bigger presidential election, and a surprise move higher or lower can have distinct political advantages. Impressive GDP numbers could help Clinton tout a continuation of President Obama’s economy, while weak growth numbers likely boosts Trump’s claim that the U.S. is losing to China (and its +6 percent annual GDP growth). Currently, the U.S. can only dream of China’s growth rates, but the country still sees numbers that can make Japan and the EU a little envious. History suggests the scales eventually tip more decidedly in one direction. The next GDP numbers takes one step closer to figuring out which way.
Figuring out what drives natural gas prices at any particular moment can be tricky, but a simplified answer is that natural gas prices care a lot about storage. That’s because storage is the market’s shorthand way of gauging the total supply/demand dynamic with a single number. Any excess supply remaining after demand is met heads into storage, where it waits to be used when demand moves higher. Because the gas demand is primarily driven by heating and power generation, that means different times of the year have very different demand expectations, even though supply (primarily via domestic production) remains somewhat steady.
Translated to the real world, the U.S. natural gas market essentially spends the entire year trying to store as much gas as possible before demand skyrockets during the winter months. That means Oct. 31, a.k.a. Halloween, marks the traditional end of the gas injection season and all eyes will be on how this year’s stocks compare to last year’s record high levels. For those with exposure to electricity and heating costs (everyone), a lower than expected storage number is the natural gas equivalent of getting nothing but candy corn and raisins while trick-or-treating. Not okay. Ever.
So October will bring much more than fall weather. Check back next month, when there’s a little thing called the U.S. Presidential Election.
November promises to be even more busy and eventful!