Being Houston remains in dire straits and I am the only one in the office again, this will be a condensed Morning Energy Blog.  And it’s still raining.

Equities and the Economy:

• Another quiet day.
• Market looking for direction.

It was another day of low volume and lack of conviction amongst investors.  The Dow closed down 5 points at 21,808 with Travelers insurance company the biggest loser in the Dow.  Wonder why that is?!  The S&P 500 closed up a single digit at 2,444 and the Nasdaq logged a  17 points gain finishing at 6,283.  Really just chatter.

Regarding economic news, the most significant report was the Commerce Department’s showing the trade deficit rose 1.8% in July to $65.1 billion.  This was pretty much as expected, but drilling down into the report it was very disconcerting to see that both exports and imports fell, 1.3% and 0.3%, respectively.  This indicates the economy is contracting.  Let’s hope this is just a “one off.”

This morning the Dow is down just 3 recovering from an over 100 point drop earlier on yet another North Korea missile test.  This one is particularly concerning because it flew over the northern part of Japan.  Although not unprecedented, it is very rare for North Korea to fire a missile over mainland Japan.  This action does nothing to encourage the buying of equities.  In fact it does the complete opposite.  It encourages investors to seek safe have assets.  And they did.  Gold hit an 9 month high on the news.

Oil

• Oil prices get hammered.
• Product prices skyrocket.

With Harvey knocking out 15% of the nation’s refining capacity oil prices have fallen and refined product prices have risen.  With the refineries shuttered there’s much less demand for oil pushing prices lower and WTI lost $1.36 yesterday closing at $46.57 and at its lowest price since July 24^th.  Brent fell $52¢ settling at $51.89.  Obviously, Harvey is having a much greater impact on WTI.

Gasoline prices have been flying higher with the September futures contract closing up 4.6¢ yesterday at $1.712/gallon (remember, this is wholesale the gasoline price.  Not what you and I pay at the pump) and at the highest level since April 17^th.

The latest data shows that about 331,370 bpd, 18.9% of Gulf of Mexico output is shut in.  For perspective, this isn’t as bad as Katrina or Rita when GOM production declined around 1.5 million bpd.

Harvey will not impact oil and natural gas production as much as previous hurricanes, thanks to shale production.  Prior to the shale boom the GOM produced about 30% of U.S. crude and 10% of the nation’s natural gas.  Now it’s about 17% for crude and 5% for natural gas.

This morning WTI remains on the defensive down 59¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Prices consolidating.
• September Nymex contract expires today.

The September Nymex contract, which expires for the month today, closed up 3.3¢ at $2.925 after falling into the mid-$2.80’s yesterday morning.  Prices initially fell on the very bearish weather forecast but a combination of 1) production shut-in and 2) current storage levels 7% below last year at this time is making the bears very cautious.  A lot of you out there may be looking for prices to tank this fall in the “shoulder season” but that only happens when storage fields are at capacity and there’s nowhere to put the gas.  That is not going to happen this year.  And then we have winter coming and that will also make the bears cautious.  So for now traders are battling it out at the $2.90 level, where we’ve been broadly trading for about 6 weeks.

Reports are that about 2 Bcf/d of natural gas, both onshore and off shore, have been shut-in.  That ain’t bearish.

This morning natty is down 0.9¢.  chatter.

Elsewhere

With all that’s going on around me and seeing the amazing outpouring of assistance and support during this historic event given by normal, everyday people, it reminds me of the following quote:

Aspire to inspire before you expire.