Energy Commodities: The Impact of Economic Growth

US GDP data

In 1Q17, the US GDP grew at an annual rate of 1.2% based on the second estimate of the Bureau of Economic Analysis released on May 26, 2017. Economists expected a growth of 0.90%.

Energy Commodities: The Impact of Economic Growth

Here’s what contributed to GDP growth in 1Q17:

  • non-residential fixed investment
  • exports
  • residential fixed investment
  • PCE (personal consumption expenditures)

US GDP data that come in above market expectations could be significant for energy commodities. GDP data reflect employment and productivity, which could impact consumer spending and the demand for gasoline and diesel. These fuels are derived from crude oil. Natural gas is also an important fuel, used in electricity generation. Since power requirements could grow with the economy, natural gas could take important cues from GDP data.

Effect of GDP on energy commodities through the US dollar

The FOMC (Federal Open Market Committee) is set to meet on June 13–14, 2017, to discuss a possible hike in the interest rate. The US dollar could have a direct relation to interest rate moves.

The dollar can drive commodity prices. However, between May 25, 2017, and June 1, 2017, both crude oil and natural gas ignored a 0.10% fall in the US dollar (UUP). US crude oil July futures (BNO) (USL (OIIL) fell 1.1%, while natural gas July futures fell 8.2% in the trailing week.