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Morning Energy Blog – December 8, 2016

Equities and the Economy:

• U.S. stocks post largest daily gains since the election.
• Dow, S&P 500 and Russell 2000 hit another record high.

U.S. equities closed materially higher with broad gains across almost all sectors. The Dow marked its 3rd consecutive record close adding a big 298 points, 1.6%, closing at 19,550. The S&P logged a gain of 29 points, 1.3%, also closing at a new record high at 2,241. The Russell 2000, an index of small capitalization companies, also closed at a new record high at 1,365 after posting a 12 point, 0.9%, rise. The Nasdaq finished up 61 points, 1.1%, at 5,394, a few points shy of its record close set in late November. Holding the Nasdaq back were biotechnology stocks which sank 3% on President-elect Trump’s comments that he is going to bring down drug prices. A word of caution. CNN’s Fear and Greed Index is in the Extreme Greed area so be careful about getting long here.

The bullish equity market in combination with the belief interest rates are going up is pushing mortgage rates up to their highest level in more than 2 years. The 30 year fixed rate mortgage averaged 4.13%, up 5 basis points.

Turning to the economic data, the Gallup organization’s job creation report showed its index hit a new high coming in at 33. Back in the depths of the Great Recession is was -5.

In a very unexpected move the ECB just concluded their monetary meeting and the bank said it was cutting its QE program of buying assets 20 billion euros to 60 billion beginning next April. One would think this would weigh on stock prices but such is not the case for European equities are trading higher particularly Germany’s DAX which is up a hefty 1.5%. This morning the Dow is up 4 and the Nasdaq is up 10.

Oil

• Oil price falls for third consecutive day.
• Price closes at lowest level in a week.

Oil futures settled at their lowest level in a week yesterday with WTI closing down $1.16 at $49.77 and Brent off 93¢ at $53.00. Prices fell despite a moderately bullish DOE weekly crude and products report showing crude inventories 2.4 million barrels last week and greater than API’s report on Tuesday of a 1.7 million barrel drop. In aggregate, crude and product inventories rose by 3.54 million barrels which is greater than the 5 year average of 6.69 million barrels. So as I stated, the report was moderately bullish.

One year forward WTI prices are in the $54 range. As a producer client told me “You can make money at that price.” The January contract is rebounding this morning up 56¢.

Vienna is once again the epicenter of global policy. That’s where OPEC will sit down with 14 non-OPEC nations this Saturday to discuss curbing output.

weather-12-8-2016
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Courtesy of MDA Information Systems LLC

Natural Gas

• Natural gas price falls for second consecutive trading session.
• January contract closes down 3.2¢ at $3.603.

After posting a gain early in the day natural gas prices closed marginally lower with the January Nymex contract closing down 3.2¢ at $3.603. As is always the case in the winter, weather is the driver which is what drove prices materially higher of late. Seriously cold temperatures are coming in this weekend and into next week with our private forecasting service calling the cold shot and “Arctic Bomb!” The same forecasting service is calling for normal to above normal temperatures for January.

Today the EIA releases its weekly storage report with the market looking for a 47 Bcf withdrawal. It’s very quiet out there with natty down 1.2¢.

Elsewhere

Being today is my eldest daughter’s 18th birthday, I am focusing on interesting birthday facts about our presidents.

• November 2nd is the only date on which more than one president was born: James Polk in 1975 and Warren Harding in 1865.

• Only one president was born during WWI, John F. Kennedy. None were born during WWII.

• October boasts the most presidential births with six (Carter, Hayes, Arthur, Eisenhower, T. Roosevelt and Adams).

• Thus far, the 19th century has been the most popular century for presidents to be born in with 19 births.

• The most popular astrological signs amongst U.S. presidents are Scorpio and Aquarius.

• From the birth of George Washington in 1732 to Barack Obama in 1961, a president has been born in every decade sans the 1810’s, 1930’s, and 1950’s.

• All of the last four presidents (George H.W. Bush, Bill Clinton, George W. Bush and Barack Obama) were born during the summer months.

• A president has been born in every month, but that’s a fairly recent phenomenon changing when George H.W. Bush (born in June) was elected in 1988.

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