Return to Blog

Morning Energy Blog – December 13, 2016

Equities and the Economy:

• U.S. equities close mixed.
• Dow logs yet another record high.

U.S. stocks meandered with little direction yesterday. When the final bell rang the Dow posted another record high rising 40 points, 0.2%, closing at 19,796, the S&P 500 and Nasdaq finished lower with the former falling 3 points ending at 2,257 and the latter losing 32 points, 0.6%, at 5,413. The interest rate on the 10 year Treasury note, the benchmark bond, also rose yesterday by 1.7 basis points to 2.478% its highest rate since June 2015. Intraday it hit a 27 month high. Interest rates have been rising of late on the belief the Fed will raise interest rates at its meeting this month which concludes tomorrow. This will make it more expensive for corporations to borrow and homeowners to finance a mortgage. Folks, the Fed is going to raise interest rates by ¼%. Bank on it. And the rate increase is fully baked into the market. The bigger question on investors’ minds is will the Fed continue to raise rates in 2017 and if so, by how much. They hope the post-meeting communique will provide direction, which it probably won’t. It’ll probably say that the Fed is “data driven” and rates will change as the data dictates. If the Fed does raise rates tomorrow it’ll be the first rate increase in 2016.

Dow 20,000 here we come! This morning the Dow is up 104 points just 97 points shy of 20,000. Whoo-hoo! By the way, the S&P is up a very nice 10.4% year-to-date! I’ll take that all day, every day.

Oil

• WTI rises $1.33 closing at $55.69
• Prices highest in 18 months.

Oil prices surged higher yesterday after the announcement that over the weekend Non-OPEC producers agreed to cut production by 588,000 bpd. This follows the November 30th deal by OPEC to cut production by 1.2 million bpd for 6 months beginning January 1st with top exporter Saudi Arabia cutting 488,000 bpd. Brent closed up $1.36 at $55.69. Both oils posted their highest settles since July 2015. Prices got an added boost when Saudi Arabia stated that they would cut more than it’s original amount if necessary. I remain skeptical if we’ll see the entire approximately 1.8 million bpd cut, but we will see some drop in production. I wish I could see 12 months into the future and see how this all plays out.

And the U.S. producer gets a wonderful Christmas present! The question now is how will “he” respond. Goldman Sachs has an opinion. They state the U.S. can add 800,000 bpd if oil prices are $55, which they are beginning in April 2017. The EIA also believes U.S. oil production is increasing. They stated in their latest monthly report that production from the seven major U.S. shale plays in January will be 2,000 bpd greater than this month.

This morning oil is down 6¢. Chatter.

weather-12-13-2016
weather-bar-image-for-blog
Courtesy of MDA Information Systems LLC

Natural Gas

• Price get bludgeoned falling 23.9¢
• 11-15 day forecast turns warmer.

After rallying nearly 50% over the past month and trading at a 2 year high natty prices yesterday were taken out behind the woodshed and whipped like a very bad school boy with the January contract falling a huge 23.9¢ closing at $3.507. The U.S. may be getting hit with an Arctic Bomb this week but the 11-15 day forecast showed warm temperatures for the eastern 1/3 of the nation yesterday slaughtering the bulls. The market opened gapping down 20¢ and a bull had no chance to get out of his position. Of interest to me, the calendar 2017 strip got hit to the tune of 10.2¢ but the calendar 2018 strip was down only 2.4¢ and the calendar 2019 strip was basically unchanged. Traders are definitely thinking that U.S. production is going to increase. The calendar 2017 strip is $3.414 while the calendar 2019 strip is a whopping 53¢ lower at $2.884.

This morning natty is moribund up 1.7¢

Elsewhere

One of my favorite fiction books is Michael Crichton’s Jurassic Park written in 1990. I read it in hard back well before there was any talk of making it into a movie. I couldn’t put it down! I was fascinated by the scientific postulate that dinosaur DNA could be extracted from the blood of a mosquito that was preserved in amber millions of years ago and scientists could clone dinosaurs from it. Pretty great concept right? Well the reality is it wouldn’t work. DNA is entirely too fragile to survive 60 odd million years. DNA does not survive very long after the death of the creature.

I’m not sure you know much about Michael Crichton (October 23, 1942 – November 4, 2008) but he is absolutely brilliant! He is obviously a successful author having sold over 200 million books worldwide with many of them adapted into films. His first best seller was The Andromeda Strain (1969) which was made into a hit movie. Crichton was the only creative artist to ever have works simultaneously carting at No. 1 in U.S. television (ER), film (Jurassic Park) and book sales (Disclosure). You should note a common theme throughout many of his works: medicine. That’s because not only was he an incredible writer, he was also a doctor graduating summa cum laude from Harvard Medical College in 1964! Pretty strong resume, eh?

Disclaimer: Although the information contained herein is from sources believed to be reliable, TFS Energy Solutions, LLC and/or any of its members, affiliates, and subsidiaries (collectively “TFS”) makes no warranty or representation that such information is correct and is not responsible for errors, omissions or misstatements of any kind. All information is provided “AS IS” and on an “AS AVAILABLE” basis and TFS disclaims all express and implied warranties related to such information and does not guarantee the accuracy, timeliness, completeness, performance or fitness for a particular purpose of any of the information. The information contained herein, including any pricing, is for informational purposes only, can be changed at any time, should be independently evaluated, and is not a binding offer to provide electricity, natural gas and related services. The parties agree that TFS’s sole function with respect to any transaction is the introduction of the parties and that each party is responsible for evaluating the merits of the transaction and credit worthiness of the other. TFS assumes no responsibility for the performance of any transaction or the financial condition of any party. TFS accepts no liability for any direct, indirect or other consequential loss arising out of any use of the information contained herein or any inaccuracy, error or omission in any of its content. This document is the property of, and is proprietary to, TFS Energy Solutions, LLC and/or any of its members, affiliates, and subsidiaries (collectively “TFS”) and is identified as “Confidential.” Those parties to whom it is distributed shall exercise the same degree of custody and care afforded their own such information. TFS makes no claims concerning the validity of the information provided herein and will not be held liable for any use of this information. The information provided herein may be displayed and printed for your internal use only and may not reproduced, retransmitted, distributed, disseminated, sold, published, broadcast or circulated to anyone without the express written consent of TFS.