Today marks the first day of the presidency of Donald Trump, and likely a new direction for government regulation of the energy industry. Like everyone else we’ll be watching new developments closely, but it remains unclear exactly what changes (if any) the new administration will be able to have on our shifting generation styles. It seems unlikely that they will be willing or able to significantly alter the shift to renewable generation, but it is definitely possible that emission restrictions could slow or lighten over the next 4 years.
Today we saw oil prices surge until around noon to end up 1.87%. This came despite the bearish rise in the dollar (oil prices and dollar strength are inversely related) and news that oil imports have risen 27% so far in the new year. We expect Monday morning to see a dramatic drop-off in futures price, unless the dollar weakens significantly before then(unlikely). We believe that the price increase was due to increased news regarding the OPEC deal as Kuwait became the latest member nation to post production data that indicated adherence to the agreed cuts.
Natural gas prices behaved as expected, falling 3.87% on a bearish weather forecast that calls for almost the opposite weather of previous models. While some of the Eastern coast and all of the Southeast will most likely remain colder than normal for this time of year, the North West and Central will be much warmer than average. Since Florida and other Southeaster states don’t account for a significant number of HDDs (heating degree days) every year we can expect a marked drop in HDDs for the month of February. Most analysts are calling for around 12% fewer HDDs, which will continue to have a bearish impact on Natural Gas prices next week. We can expect today’s losses to hold, or even increase after the weekend.
In the long term something to look out for with natural gas will be LNG production and consumption – for commercial use domestically, and for export. If crude oil prices fail to rise much during 2017 and natural gas prices remain low it is increasingly possible that we will see increased investment in LNG powered vehicles such as buses, general fleet vehicles, and heavy machinery. We might also see an increase in the number of ships capable of refining and shipping LNG to nations that consume it widely as a fuel (most notably Japan). This Summer’s widening of the Panama canal will make it increasingly economical for ships from the gulf to reach growing Asian markets.