Natural Gas Futures Burn on Winter Weather, Export Expectations

December 5, 2016 6:19AM CST

The energy sector was burning the midnight oil, particularly in natural gas futures, as a wave of winter weather hit the Midwest and thermostats were turned higher.

January natural gas futures prices were up 5.21 percent at 3.615 in Monday mid-day trading in the commodities futures markets. Some weather reports predict mixed temperatures for the remainder of the month, with forecasts for significantly colder weather, but typical weather models suggest the potential for a warm up by mid-month.

Also adding to the boost in natural gas futures prices, remarks from India’s Prime Minister Narendra Modi said the U.S .is becoming a net exporter of the commodities futures product for the first time in history. Reports say that India is giving priority to moving toward a natural gas-based economy and efforts must be made to raise local production of the fuel while also creating infrastructure conducive to imports.

Overseas and overnight, a key vote in Italy led to Prime Minister Matteo Renzi's resignation. Renzi said he would step down after being defeated in a referendum regarding his plan to overhaul the Italian constitution. Meanwhile, in Austria, leftist candidate Alexander Van der Bellen won the vote over a right-wing opponent to become the country’s next president in a victory that supports European integration and liberal internationalism. Commodities futures markets ignored the overseas news in favor of energy futures prices.

Commodities futures markets had little to no reaction to Monday’s sole economic report from the Institute for Supply Management, which rose to 57.2 percent in November from October’s 54.8 percent. Most economists anticipated an approximate 55.5 percent reading. Also on Monday, Chicago Federal Reserve President Charles Evans is scheduled to speak and investors are expecting hawkish comments ahead of next week’s Federal Open Market Committee meeting. Analysts say the possibility that the FOMC will increase the fed funds rate at the December 13-14 meeting is close to 100 percent compared to 94 percent on Friday and 68 percent in early November, ahead of another barrage of mostly upbeat economic news.

The rest of the week brings several economic reports of note to the commodities futures markets, including Tuesday’s third-quarter Productivity and Unit Labor Costs, the October Trade Balance and Factory Orders for the same month. The week also brings October Consumer Credit data, the December Michigan Consumer Sentiment report, and October Wholesale Inventories. The following week brings the December FOMC meeting.

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