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Morning Energy Blog – August 22, 2016

Equities and the Economy:

I was travelling on business last week and it was a good week for doing so because the equity markets were little changed on the week. Maybe it was the Olympics or the fact that most of Europe takes the month of August as a holiday but it was pretty quiet. First, let’s get Friday’s price action out of the way. The Dow fell 45 points finishing at 18,553, the S&P 500 lost 3 points ending at 2,184 and the Nasdaq closed down 2 at 5,238. Now, getting to the week, it wasn’t much different. The Dow fell 0.1%, the S&P finished the week exactly where it started and the Nasdaq posted a gain of 0.1%. There are a couple of interesting facts though regarding the equity markets. With Friday’s close the S&P has posted 30 consecutive sessions without a 1% move on a closing basis. Also, the Nasdaq notched it 8th consecutive weekly gain marking the longest such stretch since April 23, 2010. For the year the S&P is up about 7%.

This morning the sailboats remain in the irons with the Dow up 15. Yawn. Looking ahead at the week, the big event will be Janet Yellen speaking at a symposium in Jackson Hole on Friday with the market looking for direction on interest rates. There’s been a lot of public talk by more than one Fed president that it’s time to raise interest rates. That being said, this is Ms. Yellen’s Fed and what she desires always carries the day.

Oil

Equities may have been sedate last week but oil sure wasn’t. Friday’s price action wasn’t extraordinary with WTI climbing 30¢ closing at $48.52 and Brent settling down a penny at $50.88, but it was a heck of a week for the bulls with WTI marking a 9% gain which is the largest weekly gain since March. WTI has posted a gain of almost $10 a barrel since early August on speculation that Saudi Arabia and other OPEC countries might agree to a production freeze. My take on the situation is this. The oil futures market was egregiously oversold when we were down below $40 and the talk of a production freeze sent the shorts running to cover and the price rise is the result of this short covering. Additional buying came in from technicians when the rally propelled oil from a bear market to a bull market earlier in the month. Whether you’re a bull or a bear the E&P companies look like they can make current prices work. Baker Hughes in its weekly rig count report on Friday noted another increase of 10 oil rigs were put to work last week. This is the 8th consecutive week the rig count has risen and the longest recovery streak in more than two years.

The newswires this morning are posting bearish information reporting that Iraq, OPEC’s second largest producer, resumed pumping oil from fields operated by the state run North Oil Company to Turkey at about 700,000 bpd with plans to double the volume by next week. The state owned oil company in Libya began loading a tanker with crude at the country’s eastern Zueitina port which has been closed since November. Finally, in Nigeria where the Nigerian Delta Avengers have been blowing up stuff, its reported they have called a ceasefire which will result in increased production. On all the bearish news WTI is down $1.32 this morning.

Blog Weather 8-22-16
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

The September Nymex contract got knackered on Friday falling 9.0¢ closing at $2.584 and while volatility existed during the week the close on Friday was almost at the exact same price as the previous Friday which was $2.586. Last Thursday’s EIA storage report continued the all-summer trend of below average storage injections marking the 15th consecutive week of a below average injection. That being said, end of season storage levels are still on pace to be the second highest ever.

This morning natty is popping being up 10.5¢. There’s no doubt the reason and that is the weather forecast. Whereas on Friday the forecast in the 11-15 day time frame showed above normal temps only in the east today’s forecast shows a broad swath of above normal temperatures encompassing the entire country save the northwest.

Elsewhere

My teenage daughter has forced me onto Facebook if I want to see pictures of her so I thought I’d share some facts on the company.

As of March 31, 2016 Facebook has 1.65 million monthly active users around the world.

The company estimates it has an average of 1.09 billion daily active users.

Approximately 82.4% of Facebook daily active users are outside the U.S. and Canada.

The average Facebook U.S. user spends 40 minutes a day on the site.

Smartphone users check Facebook 14 times a day.

Facebook tracks which sites you visit, even after you’ve signed out.

Facebook is primarily blue because Mark Zuckerberg suffers re-green color blindness.

There are about 30 million dead people on Facebook.

Facebook, Twitter and the New York Times have been blocked in China since 2009.

There are more Facebook users from the U.S. than U.S. citizens that voted in the last election.

So many Facebook photos and videos are uploaded via mobile that it takes up 27% of upstream web traffic.

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