Equities and the Economy:

• Price action subdued yesterday.
• Investors digesting Syrian attack.

U.S. stocks ended little changed yesterday with the Dow posting a 15 point gain to 20,663, the S&P 500 closing 5 points higher at 2,357 and the Nasdaq rising 14 points to 5,879. Forget yesterday for as everyone reading my Blog knows a big event occurred last night which was President Trump authorizing sending 59 Tomahawk cruise missiles targeting the Syrian Shayrat Airfield. The immediate market reaction was four fold: Investors sold stocks and shifted to safer haven assets: Dow futures fell 130 points and gold hit a 5 month high. Oil rallied to a one month high spiking 74¢/bb,. The Russian Ruble hit a two week low. That was last night. When I hit my desk this morning Dow futures had fully recovered and were flat to yesterday’s close.

Getting the fundamental news out of the way, the Labor Department released its regular weekly initial jobless claims yesterday noting claims fell by 25,000 last week to 234,000 and much better than economist forecasts. The number of unemployment recipients is currently 7.1% lower than last year at this time. All good news. The downward trend in claims that began in the spring of 2009 remains intact. This brings us to the major economic report of the day, week, maybe month. The Labor Department’s Employment Situation report, which was just released. It was mildly disappointing. Only 98,000 non-farm payrolls were added in March. Much less than forecasts of 180,000. However, the unemployment rate plunged to 4.5%, a new post-recession low and the lowest since May 2007. More on this in Monday Morning’s Energy Blog.

Investors are slow to move this morning with the Dow up 12.

Oil

• Crude prices rise for 7th day out of 9.
• Geopolitical price premium increases.

Oil prices rose yesterday for the 7th session out of 9 with WTI closing up 55¢ at $51.70 and Brent settling up 53¢ at $54.89. On word of the Syrian attack oil prices spiked 2% to a one month high in extremely heavy volume. Although Syria only produces 50,000 bpd, its arena includes Russian and Iran which increases uncertainty and geopolitical risk and associated premium. Oil has given up its overnight gains currently trading up only 20¢. This afternoon we get Baker Hugh’s weekly rig count report. Anyone want to take this other side of my bet the rig count went up?

Courtesy of MDA Information Systems LLC

Natural Gas

• EIA storage report bullish.
• Prices close higher.

The EIA released its weekly natural gas storage report yesterday noting 2 Bcf was injected into storage last week which was much less than the 10 Bcf the market was expecting. Add that to the fact that cash prices were up 14¢ yesterday at $3.21, the highest since the end of January, and you got the make’ns of a bull move. And that’s exactly how the day went with the May contract climbing 6.5¢ closing at a 2 month high of $3.331. Folks, we need more production. Demand keeps increasing with no increase in production. Not only is the economy strong but you have more LNG trains coming on between now and the end of the year and each train is about 0.8 Bcf/d of demand. Both the oil and gas rig counts are up but we’re not seeing any increase in production. That might change in Q3 or Q4. Call it the lag effect. Unlike oil which can be stored on site, it takes time to build gathering and processing pipelines and larger transmission pipelines. Something to watch out for, the higher natty goes, the more coal will be burned for electric generation at gas’ expense. And this is happening. Per the Association of American Railroads coal carloads are up 27% above a year ago levels. Remember, 90% of the coal produced in the U.S. is used for electric generation. Looks like there’s some profit taking this morning. Natty is down 5.7¢.

Elsewhere

Here’s a data point I found amazing. Per our EIA, on March 11, 2017, utility-scale solar generation in California accounted for almost 40% of the net grid power produced during the hours of 11 AM to 2 PM. 40%! That’s the highest level ever and the result of an almost 50% growth in utility-scale solar photovoltaic installed capacity in 2016. This large and growing amount of solar generation has occasionally driven real time power prices on the grid during late winter and early spring daylight hours (not night time!) to very low, even sometimes negative, prices. Sounds good, eh? Cheap power. Well not so much. The California ratepayers’ electricity rates are among the highest in that nation.