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What's in Store for Energy Commodities This Week?

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Part 2
What's in Store for Energy Commodities This Week? PART 2 OF 5

US Unemployment Claims: Why They Matter to Energy Investors

US initial jobless claims data

US (VFINX) (VOO) initial jobless claims were at 223,000 for the week ending February 25, 2017, according to the Department of Labor’s report on March 2, 2017. The expectation had been for 243,000 initial filings for unemployment benefits.

US Unemployment Claims: Why They Matter to Energy Investors

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Initial jobless claims show how many people are applying for unemployment benefits for the first time. The number has trended lower since the financial crisis, which indicates the job market is improving. The lower number might also hint at improving consumer spending power. Consumer spending power can drive demand for crude-oil-derived fuels such as gasoline and diesel. Natural gas is steadily becoming a major source of fuel for power stations. An improving economy could mean greater demand for electric power.

Impact of US dollar on crude oil and natural gas

US unemployment data could also be an important driver for the US dollar (UUP) (USDU). The data represents the current state of the economy. Last week, the US dollar rose 0.4%.

A stronger dollar makes crude oil expensive for oil-importing countries, which pressures crude oil (USL) prices. The opposite is also true. Natural gas wasn’t exported in large quantities outside North America until recently, so it hasn’t historically had a similar relationship with the US Dollar Index.

Impact on energy ETFs

Energy ETFs are also impacted by economic data and the relationship between crude oil prices (UWTI) (USO) (OIIL) and natural gas (GASL) (GASX) with the US Dollar Index. These ETFs include the Direxion Daily Energy Bear 3X ETF (ERY), the First Trust Energy AlphaDEX ETF (FXN), the ProShares UltraShort Bloomberg Crude Oil (SCO), the iShares US Oil Equipment & Services (IEZ), and the Energy Select Sector SPDR ETF (XLE).

In the next part of this series, we’ll look at the relationship between crude oil, natural gas, and the S&P 500 Index.

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