Good morning.  After a two day rebound stocks paused yesterday with the Dow falling 9 points to 16,561, the S&P 500 was down 3 to 1,934 and the Nasdaq lost 12 to 4,389. The economic news released yesterday on the U.S. economy was pleasantly positive but overshadowing this data was geopolitical news, specifically Iraq and Ukraine/Russia.  Regarding the latter, the 300 or so Russian trucks heading to the northern and eastern Ukrainian border ostensibly carrying humanitarian aid continue their trek.  Kiev states the distribution of that aid is to be under the auspices of the International Red Cross but Russian has yet to confirm this directive.  With respect to the former, The U.S. continues to attack the Islamic State (formerly ISIS, aka ISIL) while dropping aid to the refugees stranded on mountain tops and also giving time for the U.S. to provide supplies to the Kurds, more accurately known as the Peshmerga.

Yesterday various reports were released on the U.S. economy and all were at least mildly positive.  The US budget deficit came in at $95 billion, 3% smaller than the same month last year, and less than the $96-$97 billion Wall Street was anticipating.  One of the reasons the deficit came in better than expected was because of another report showing tax receipts were $211 billion last month which is an increase of 5% over last year at this time and indeed very real proof our economy is indeed doing better.  Additionally, the National Federation of Independent Business released their index of 95.7 for July and although it’s meaning may be obscure to us, it came in better than the consensus.  Finally, the JOLTS (Job Openings and Labor Turnover) survey came in at 4,671 compared to the previous month’s 4,577.  So as you can see, all the good data was digested by investors and traders while they keep one eye on Gaza, Iraq and Ukraine.  And let’s not forget Libya which is growing worse by the hour with word that Col. Mohammed Suwasysi, the recently appointed police chief in that country’s capital, Tripoli, was shot and killed.  That’s another country in chaos.

This morning Dow futures are up 43 primarily driven higher on the coattails of European stocks which are trading up on good corporate earnings data.  A word of caution here though and that is 10 year Treasury yield is lower by two basis points at 2.42%.  I say this because normally yields increase when equities rise because money moves from safety to risk, bonds to equities.  However, I can understand the strength in bonds with all the geopolitical risk out there.  Preservation of capital always trumps growth.  It’s human behavior and markets are heavily influenced by human behavior (can you say “bubbles”?)

Geopolitical tensions abound but oil traders could care less and the bears are firmly in control.  Yesterday WTI fell 71¢ settling at $97.37 and Brent got walloped losing $1.66 closing at $103.02.  This was the 4^th consecutive down day for Brent and prices are now at their lowest level in more than a year.  Sellers jumped on the IEA (again, not our EIA) report pointing out the world is well supplied and there is actually a glut in the Atlantic basin.  Additionally, OPEC is producing at a 5 month high of 30.44 million bpd.  Traders also look to other market for indications of demand and one of those is the copper market and prices for that metal are trading at 6 week lows.

This morning its total chatter for WTI with it trading up 5¢.

Natural gas took the day off yesterday closing up a meaningless $0.009 at $3.974.  The battle rages between increased production, increased demand for natty with its equivalent price below coal and the need to inject gas into the ground being levels are 18% below last year and 20% below the 5 year average.  In times like these the market looks extra closely to the cash market and for today it is weak with below normal temperatures in the eastern third of the country the next 5 days, but that will be quickly changing.  The forecast for the 6-15 day time frame is downright warm for the east and this will definitely increase natural gas demand as those electric peaking units start up.  This will be the first extended heat in the east of the year!

This morning the cash market is trumping the forecast with natty being down 9.4¢.

On a logistical note, this will be the last Morning Energy Report until August 22^nd.  I, with my two teenage daughters, are going on our annual trek to SoCal where I get to spend time with my great friend of 25 years.  Have a great day and remember, trying times are no time to quit trying!

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