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Cold Weather Spurs Accelerated Gas Inventory Drawdowns

Natural Gas Trending Lower Following US Energy Information Administration Report

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The Energy Information Administration (EIA) issued their weekly storage report on natural gas and crude oil on Thursday, adding to recent volatility in energy commodities. Crude oil inventories rose, beating expectations whereas the amount of natural gas in storage fell by more than expected as another cold front approaches the lower 48 states.

Seasonal Factors Drive Natural Gas Inventories Lower


With colder weather forecast over the coming weeks after frigid conditions sent household heating demand surging, natural gas has numerous factors backing up recent price gains.

The next two weeks are expected to result in freezing conditions across nearly all of the lower 48 states, resulting in heightened demand and diminished supply.  Already supply is experiencing faster than anticipated drawdowns, with the latest figures from the EIA showing that gas in underground storage fell by 237 BCF compared to analyst expectations of a 222 BCF draw.

Nevertheless gas prices fell after the announcement, pulling back from recent multi-year highs before rebounding modestly during the Asian overnight session.  Oil prices are trending slightly higher after comparable inventory figures showed another surprising inventory build and production which fell modestly.

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US Jobless Claims Fell Last Week


An important indicator of layoffs continued to float close to historically low levels with the US job market ending 2016 on solid ground. The Labor Department reported that applications for new unemployment benefits dropped by 10,000 to a seasonally adjusted 265,000 for the week ended December 24th, matching economists’ expectations as well as reversing a spike in the previous week to some extent.

Short-term volatility can be prominent around the holidays but analysts say that the trend appears vigorous. It is important to note that initial jobless claims have now been below 300,000 for 95 successive weeks – the lengthiest streak since 1970.

All in all, low unemployment and signs of steady inflation could buttress the US Federal Reserve’s intentions to progressively raise short-term interest rates all through 2017 which could help fuel further upside in the dollar, pressuring haven assets lower.

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Wall Street Ends Thursday Session Lower Ahead of New Year


With holiday trading volumes that are well below average, equities came under renewed pressure on Thursday, extending Wednesday’s losses. Bank shares weighed on equity benchmarks as traders looked to close out remaining positions ahead of 2017.

During the American cash equity session, the S&P 500 lost 0.66 points, or -0.03% while the Nasdaq Composite dropped by -0.12% to 5,432.09 and the Dow Jones Industrial Average declined 13.9 points. The Dow has not yet surpassed the 20,000 after frequently coming within 20 points of what was hailed as a likely breakthrough.

Citigroup, Morgan Stanley and Bank of America all fell at least -1.00%. S&P 500 futures have gained 9.30% over the last 52-week, namely due to a post-election surge that has some market participants nervous about a potential correction in early 2017.

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Gold Set for 9.00% Gain in 2016


In its first annual advance in four years, gold has risen by 9.32% during 2016 despite a sharp decline in November. Spot gold was up 0.10% at $1,159.36 per troy ounce on Thursday after having hit a more than two-week high of $1,163.14. In its biggest daily percentage gain since late September, gold rose over 1.00% during Thursday’s session.

Due to economic and political uncertainties like “Brexit,” rising US interest rates and Trump’s election, gold has notched strong gains, having risen nearly 2.50% this week alone. Nevertheless, gold is still down about -12.00% this quarter and nearly -1.00% in December, namely due to heightened inflows into US assets amid speculation that increased fiscal stimulus from President-elect Trump will send interest rates and stock prices higher in 2017.

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