Good morning. Well I’m back from our annual company meeting in Stamford, CT and although it was a very busy week the weather was phenomenal! And I come back to 95 degrees and 90% humidity. As you regular readers know, it’s times like these, i.e. multiple days of not producing my Morning Energy Report, we get to reflect on a modestly longer term and see what the markets have done. Last Monday was the last Morning Energy Report referencing the markets from the previous Friday so a week has passed. During that time frame the Dow has fallen 139 points, 0.8%, ending Friday at 16,961. 123 of those points occurred on Friday so for the first 4 days of the week equities were pretty flat. On Friday the S&P 500 closed at 1,978 while a week before it ended at 2,002 so we’ve fallen 1.2% last week. The Nasdaq was at 4,432 a week ago but finished the week at 4,450 so the tech heavy index actually gained 18 points, 0.4%, for the week. So we had a very choppy weak with certain industry specific segments out performing others. Most of the week’s losses occurred on Friday when Amazon and Visa both said the second half of the year was looking more troubled that originally expected.

Photo: Close up of The Thinker by Brian Hillegas / Licensed under CC BY 2.0

This Asian markets jumped materially as you slept with China’s Shanghai skyrocketing 2.41% with traders buying on speculation the government there will announce stimulation measures. That “love” is not being carried over to the European and U.S. markets this morning with the Dow down 77 currently. There will be a plethora of domestic economic data released this week culminating with the “big daddy” Labor Department’s July Employment Situation Report on Friday. And of course we have the geopolitical strife in Gaza and eastern Ukraine which is “dynamic” and investors will definitely be watching.

Friday a week ago WTI closed at $103.13 and Brent settled at $107.24. This past Friday WTI ended at $102.09 while Brent settled at $108.39. So as you can see the Brent/WTI spread widened from $4.11 to $6.30, or $2.19 which makes complete send with the fighting in the Middle East and Eastern Europe which affects Brent more than WTI. All-in-all though prices haven’t really changed that much over the week especially when considering the fighting in Gaza. Anytime there’s fighting in the Middle East the fear premium on oil increases. (Note that I mentioned Brent first in the Brent/WTI spread. When quoting spreads you always quote the “premium,” or higher priced market, first).

This morning WTI is getting hit down 82¢. Reports surfaced over the weekend that North Sea and West African physical crude markets are over supplied which is weighing on the “black gold.” That being said all the geopolitical chaos in Gaza, Ukraine and Libya will make the bulls trigger happy. Regarding Libya, and this is somewhat dated news, the U.S. has closed its embassy there due to the fighting. All personnel have been evacuated. I guarantee you Benghazi is still in the Administration’s mind.

Natural gas fell 17¢ last week from $3.951 to $3.781 on Friday. Natty prices have fallen $1.15, 25%, over the past 6 weeks to levels not seen since last November and this is with storage levels still 20% below last year and 24% below the 5 year average. Natural gas production has been strong but the big factor driving prices lower has been the sequel to the Polar Vortex, i.e. mini-Polar Vortex. Temperatures in the Midwest have been so anomalously cool this July that some cities will have the coolest July ever on record. That my friends is a bull killer. And the weather map this morning continues to be painted blue. Actually I hope some of that blue gets down here because it’s freak’n hot here. Heat index today will be about 103.