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Morning Energy Blog – December 22, 2016

Equities and the Economy:

• U.S. stocks retreat modestly.
• Volumes thinning.

After posting, or nearly posting, new record highs on Tuesday U.S. equities closed marginally lower yesterday. The Dow closed down 32 points at 19,942, the S&P lost 6 ending at 2,265 and the Nasdaq declined 13 finishing at 5,471. All chatter. With the holiday weekend rapidly approaching the volume traded has been, and will continue to, wane. It would be an opportune time for someone to make a power move and “print” 20,000 Dow!

The fundamental news is all about housing. The National Association of Realtors (NAR) reported that sales of existing homes rose 0.7% in November to an annualized rate of 5.61 million units. These numbers probably don’t mean much to you but the takeaway is that 1) the data came in stronger than analysts’ expectations and 2) sales are very near a decade high. Further NAR stated that the inventory of new homes for sale fell to under 1.9 million homes, down 9% from a year ago, and the median price of a new home rose 6.8% from a year ago to $234,000. The NAR’s chief economist noted that housing supply at the beginning of 2016 was inadequate and is even lower going into 2017.

More housing data came from S&P CoreLogic Case-Shiller stating its U.S. Home Price Index for November was 184.80. The significance here is that the index is now higher than it was back in July 2006 before the Great Recession. This means the consumer’s balance sheet, i.e. net worth, is all but completely repaired when it comes to housing and hence he or she is feeling much, much better.

This morning it’s very quiet with the Dow down 16 points.

Oil

• EIA surprises with bearish weekly crude and products report.
• WTI closes down 81¢ at $52.49.

The EIA released its weekly storage report yesterday morning surprising traders noting that crude inventories rose 2.3 million barrels last week which was counter to expectations of a withdraw of 2.4 million barrels and the API’s report on Tuesday of a drop in inventories. Somewhat offsetting that seriously bearish data was the gasoline inventory data which, sparing you the numbers, was modestly bullish. In aggregate the data was mildly bearish which is why WTI fell 81¢ settling at $52.49. Brent lost 89¢ closing at $54.46.

China reported some bullish data yesterday noting crude imports increased 18% y-o-y suggesting economic activity is growing there.

This morning WTI is up 52¢.

weather-12-21-2016
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Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas goes apogee rising 27.9¢ closing at $3.542.
• Private forecasting service suggesting cold shot in mid-January.

The 1-15 day weather forecast may be very bearish but that’s not what traders were focusing on yesterday. A private forecasting service put out a notice predicting a major cold shot for the Midwest in mid-January which brought in both short covering, which had occurred due to the short term warm forecast, as well as new length coming into the market. The combination made natty go ballistic and the January contract closed up a massive 27.9¢, 8.6%, at $3.542.

Today is Thursday which means its EIA storage report day. The market is looking for a huge withdrawal of 207 Bcf. This is more than double the 5 year average withdrawal for this week which is 101 Bcf and over 6 times the last year’s 33 Bcf withdrawal. The large number is spurred by an average U.S. temperature of only 38 degrees over the course of the week reaching a low of 32 degrees last Thursday and averaging 4.4 degrees colder than normal.

This morning the bulls continue to rule with natty up 5.5¢.

Elsewhere

Here’s how some of our past president’s celebrated Christmas time at the White House:

• George and Martha Washington loved Christmas and always made it a big affair. They would always have lots of entertainment and music and would invite hundreds of people into their home.

• Thomas Jefferson made sure the times were filled with family and fun. He became a widower during his presidency so Secretary of State James Madison’s wife, Dolly, acted as official hostess. All of Jefferson’s grandchildren came as well as a hundred guests. For dinner he ate his favorite meal mincemeat pie and afterwards he played the violin.

• Andrew Jackson never got to experience a joyful Christmas as a child so when he became president he invited all the children in the area to a Christmas party where he took them out to deliver gifts to past presidents and the local orphanage.

• The tradition of decorating a tree during the Christmas season was not a fixture of the holidays until the very late 1800’s. In 1889, Benjamin Harrison was the first president to bring a tree inside the White House.

• President and Mrs. Roosevelt would throw a large party for children. In 1903, they invited 500 children to come play games, dance, listen to special music, eat a nice dinner and enjoy Santa-shaped ice cream.

• First Lady Lou Hoover began the tradition of trimming the White House official Christmas tree in 1929. Since this time every First Lady after has had the honor of decorating the official tree.

• An unspoken tree war developed in the White House. For many years the Eisenhower administration held the record for having the most Christmas trees inside the house with a total of 27. In 1997, the Clinton’s surpassed that number having 36 trees in the White House.

• In 1929 while hosting the Christmas party an electrical fire broke out in the West Wing. Kudos go to Mrs. Hoover for instead of panicking and sending the children home she escorted them to a different section of the of the house and had the band play louder to drown out the sound of the fire engines.

• Sending out Christmas cards did not catch on until the late 1800’s. Slowly the tradition took hold but by the 1970’s it was crazy! President Carter ordered 60,000 for his first Christmas in the White House in 1977 but in 1979 when 105,000 were ordered he actually hired a committee to figure out what happened to create such a long list of addresses.

• As the years pass the holiday season at the White House gets more and more elaborate, and expensive. In 2009 the White House’s pastry chef planned a gingerbread house to beat all others. The edible house weighed in at an incredible 390 pounds and required a bandsaw for its construction. The tradition started in 1969 when a mere 16 pounds of gingerbread and 6 pounds of icing.

On a logistical note, I will be out of town the next seven days so look for the next Morning Energy Blog on Thursday December 29th. May you and your family have a wonderful holiday!

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