Equities and the Economy:

• Dow and S&P set record highs.
• FOMC meeting concludes today.

After two days of capitulation technology shares rebounded pushing the Dow and S&P 500 to new record highs. The Dow gained 93 points to close at 21,328 and the S&P rose 11 points to 2,440. While the Nasdaq didn’t close anywhere close to its record high it did have a good day rising 45 points to 6,220.

The market was helped in that Attorney General Jeff Sessions testimony before the Senate Intelligence Committee didn’t result in any “bombs exploding” in the on-going Russia investigation.

The major economic report yesterday was the NFIB’s Small Business Optimism Index. While May’s index was unchanged from April’s at 104,5, the take-away here is the index remains at a 12 year high. Strong hiring was the feature with hiring in May near its highest level in the 43 year history of the index! The biggest challenge the small business owner is saying he or she is having is the tight labor market. According to the NFIB’s chief economist, it’s getting worse, adding small businesses can’t keep up with customer demand because they can’t find enough qualified workers. The key word here is “qualified.” There’s a major disconnect in today’s labor market between the skill set of the available worker and what skill sets business needs.

Today the FOMC concludes their 2 day June meeting. It’s a slam dunk the Fed will increase the overnight interest rate by ¼%. The real question is what the communique will imply about future hikes.

This morning it’s quiet with the Dow up 5. Chatter.

Oil

• Prices mark 3rd day of modest gains.
• API report marginally bearish.

Oil prices marked a 3rd consecutive day of gains but for all 3 days the gains have been quite modest. Yesterday WTI closed up 38¢ at $46.46 and Brent added 43¢ settling at $48.72. The API released its weekly report showing both crude and gasoline inventories rose more than forecasts for the week but distillates (which is mostly diesel) fell a lot more than expected. All-in-all the report was mildly bearish.

OPEC released its monthly production report showing an increase in May by 1% to 32.14 million bpd. The increase came from the 3 countries not in the production cut agreement: Libya, Nigeria and Iraq.

Offsetting that bearish news was Saudi Arabia’s comments yesterday that it is cutting its sales to the U.S. to about 850,000 bpd in July. This is the lowest for a month since 1988.

The yin-yang of reports is resulting in WTI chopping around this morning down 22¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Cash market weaker.
• Still consolidating around $3.00.

After prices traded higher overnight cash market trading kicked-in and couldn’t support the higher prices and the July Nymex contract bled off closing down 5.8¢ at $2.966. Looking at the forest rather than the trees, we’re still trading around $3.00 which is where we’ve been for over 2 weeks.

The current heat in the Midwest and east will be mitigating next week bringing with it normal temperatures, The extended forecast, 11-15 day term, has some heat returning but there’s low confidence here.

After rising to highs for the year U.S. production has backed off about 1 Bcf/d. Traders will look to see if this is a trend, but my bet is we get back up to 72.0 Bcf/d.

The North Dakota Industrial Commission (which is like a PUC in other states) reported that Bakken Shale gas production climbed 133 MMcf/d, 6%, in April to a record 1.8 Bcf/d. The rig count in the region has more than doubled in the last year rising from 24 to 55 rigs. Y-t-d well starts are up 63% to 425 starts. This is important to me because the Bakken is one of the, if not the, most expensive basin in the U.S. to drill.

This morning natty is meandering up 1.8¢.

Elsewhere

I’m not sure you’re familiar with Spodify but it is a music streaming business. You can get the free service, which has advertisements, or the premium service with no advertisements, improved streaming quality and offline music downloads. It’s one of the few subscription services I use. It was developed by a startup in Stockholm, Sweden in 2008 and has grown radically since that time. Technically, it provides digital rights management-protected content from record labels and media companies. Spodify is available in most of the Americas, Europe, Australia, New Zealand and parts of Asia. You can search by artist, song, album, playlist, or record label. But here’s the statistics that blew me away. Spodify provides access to over 30 million songs and as of June 2016 had over 100 million monthly active users and as of March 2017 had over 50 million paying subscribers. At $9.99 per subscription, well you can do that math.

On a logistical note, the next Morning Energy Blog will be June 22nd . I will taking my 16 & 18 year old daughters to Washington DC for their first time. I want them to get a better understanding of how incredibly fortunate they are. There’s a lot of names on walls and crosses there of people who made the ultimate sacrifice to bring them freedom.