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Morning Energy Blog – December 4, 2017

Equities and the Economy:

• Stocks end slightly lower.
• Rotation out of tech continues.

U.S. equities ended lower on Friday on the news surrounding former national security advisor Michael Flynn pleading guilty to lying to the FBI adding an element of political uncertainty into the markets. On the day the Dow lost 41 points to 24,232, the S&P 500 fell 5 points to 6,848 and the Nasdaq declined 26 points to 6,848. That being said, the Flynn news was not enough to stop the Dow from having its best week of the year posting a big gain 2.9%. The S&P also had a good week rising 1.5%, its biggest since September. Both the Dow and S&P have risen in 10 of the past 12 weeks. The Nasdaq fell 0.6% for the week which included it biggest one-day drop on Wednesday in more than 3 months. What’s going on here is that the Nasdaq has had an incredible year being up 28% and big money managers are realigning their portfolios as we approach the end of the year. Here’s an amazing statistic for you. The S&P has risen a record 13 months in a row and the longest streak ever without a 3% correction.

Regarding U.S. economic data, new orders for manufactured goods excluding the volatile transportation (aircraft) sector were up 2.0% in September coming in slightly better than expectations. Both international and domestic demand remain sturdy. It’s not just the U.S. that’s performing well, the global economy is as well.

On Saturday the Senate passed the Republican sponsored tax reform proposal advancing it to a conference committee to work out differences with the one passed in the House and investors are cheering the move, and that’s an understatement for the Dow is screaming higher up a huge 212 points. Equities both in the U.S. and Europe are also getting a boost from fundamental data out of Europe. Today British PMI data showed the British construction sector activity is at its strongest in 5 months, and this is in spite of concerns surrounding Brexit. Additionally, on Friday euro zone PMI showed factories there had their busiest month in more than 17 years in November with prices rising at their fastest rate in more than 6 years. That doesn’t happen when times are bad folks.

Oil

• Prices close at highest level for the week.
• U.S. oil rig count continues to creep higher.

Oil prices got some follow through from Thursday’s OPEC and Russian agreement to extend the production cuts until the end of 2018, with a review after 6 months. WTI closed up 96¢ at $58.36 and Brent popped $1.10 settling at $63.73. Those closes were the highest closes of the week and are approaching their highest level since the summer of 2015. Prices were little changed week-on-week though being down 1%.

Baker Hughes released their weekly rig count report stating the U.S. oil rig count rose for a second consecutive week, this time by 2 rigs, to 749 rigs. There are currently 272 more oil rigs working in the U.S. than at this time last year. Increased U.S. oil production is definitely capping prices. Production rose by 290,000 bpd in September to 9.48 million bpd which is the highest monthly output since April 2015 and the largest monthly gain since September 2012.

This morning WTI is down 59¢.

Blog Weather 12-4-2017
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• Prices close marginally higher.
• Polar Vortex coming.

On Friday the morning weather forecast showed continued cold for the eastern half of the country initially popping prices up as much as 9¢ but as the day wore on the market settled back and at the closing bell January natural gas closed up 3.6¢ at $3.061. For the week the January contract was up about 5%. Let’s move on to this morning. You folks in the eastern half of the country better break out the very warmest coat you have because some super cold weather is coming your way. For the 6-15 day time frame temps are going to average 8 to 14 degrees below normal. I said this last week and I’m repeating this. I’m not sure anyone is calling it yet, but this event is a Polar Vortex. Now the question is how long it’ll stick around. We used to call this a “Hudson Bay low” event for that is where these types of events are centered. But a few years ago somebody introduced the much more dramatic term “Polar Vortex” which has now replaced the more boring term “Hudson Bay low.”

Very interesting to me, natty is only up 1.1¢ this morning. I guess traders are looking at the growing U.S. production, but I’m telling you, this cold event coming is going to suck up a lot of gas.

Elsewhere

Thomas Edison invented the light bulb. Wrong! Light bulbs were in use long before Edison applied for the patent in 1879. British inventor Humphry Davy invented an incandescent light bulb in 1801 and created the “arc lamp” in 1809. British inventor Joseph Wilson Swan started experimenting with light bulb designs in 1850. On December 18,1878, Swan demonstrated a light bulb at a lecture in Newcastle upon Tyne that soon had the attention of the world, including Edison. Swan was awarded a light bulb patent (patent No. 4933) only in 1880, the year in which his house in Gateshead, England became the first house in the world lit by a light bulb.
Edison entered the race to develop an effective light bulb in 1878. He struggled with a solution at first but, with the assistance of Francis Upton, on October, 22 1879 he had a breakthrough. His light bulb burned continuously for 13 hours. Edison filed for a patent on November, 4 1879. Edison continued with experiments and by the end of 1880 his light bulbs burned for up to 600 hours. Eventually they would glow for up to 1,200 hours.

Edison went on to make big buck from the light bulb but Swan sued Edison for infringement and won. As part of the settlement, Edison was forced to take Swan in as a partner but later bought him out in the company that was to become General Electric.

So who invented the light bulb? It is generally recognized Thomas Edison perfected the electric light bulb but that Humphry Davy invented it.

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