Economic Indicators Weekly

- Americans have two times of year when their energy demand is high. In the summer, gasoline demand is high because people go on summer vacations and road trips. In the winter, natural gas demand is high because it's cold. And natural gas is critical for heating demand. But demand isn't the only thing that drives energy prices. Energy supplies are important for prices too. This is why petroleum inventories of gasoline, diesel, and crude oil, as well as inventories of natural gas determine if prices will be high when demand is high.

And energy prices don't just impact what you pay for fuel at the gas pump, or what you pay to heat your house or fireplace. Energy prices also impact the value of energy investments you may have. And energy prices impact inflation. There are two important weekly inventory reports from the U.S. Department of Energy's Energy Information Agency, that can influence energy prices. The first report is the Weekly Petroleum Status Report, which is informally called DOE oil inventories.

And the second is the Weekly Natural Gas Storage Report, informally called the EIA storage report. The DOE oil inventories includes data about U.S. crude oil, gasoline, and distillate inventory levels. Distillates include diesel and heating oil. When crude oil and other petroleum product inventories rise a lot, the appearance of more supply can weigh on oil prices. After all, supply goes up, prices go down.

And a drop in oil prices can weigh on oil company stock prices. But if a weekly report shows a big drop in those inventories, that's often interpreted that supplies are tight. And when supply goes down, prices go up. Which can make crude oil, gasoline, and diesel prices rise. This can send the price of oil and gas companies, like Exxon or BP higher as well. The EIA Natural Gas Report shows natural gas inventory levels in various parts of the United States.

Natural gas prices respond to weekly changes in inventories, especially when there are big increases or decreases. Companies that largely produce natural gas, as opposed to crude oil, can see their stock prices rise and fall significantly with changes in this weekly storage data. Natural gas inventories are most critical during the winter because that's when the demand is highest and consumption is most critical. Sharp, persistent drops in inventory during the winter send natural gas prices higher.

And this can be a real cause of concern in major cities that have limited capacity to get natural gas into them when it's cold. Very cold weather can make inventories fall sharply, making prices shoot up. But very mild winter weather can have less of an impact on inventories, making prices fall, even when it's cold out. Natural gas price spikes can impact people's budgets, making them spend more on heat. Plus, natural gas can negatively impact company budgets. Lower natural gas prices are better for the economy.

Lower natural gas prices are more favorable for business budgets, and they're better for people's expenses in the winter. If you have investments in the energy space, they'll be driven significantly by these weekly reports. Perhaps your company's profit margins shrink when oil prices or natural gas prices rise. If so, these would be important reports to watch.