Equities and the Economy:

• U.S. stocks continue to meander.
• Volume very low.

The major U.S. equity index closed lower yesterday with the Dow falling 37 to 19,800, the S&P 500 off 6 to 2,265 and the Nasdaq closing down a scant 2 points at 5,553. Chatter. Trading volumes are extremely low, not just here but globally, and volatility has evaporated. The market is bounded by the S&P 2,215 on the low side and 2,280 on the high and everything in between is trench warfare. Even CNN’s Fear & Greed Index is virtually dead neutral at 49 (the scale is 1 – 100, Extreme Fear to Extreme Greed). Eventually volatility shall return to the market. When? No idea, but it’ll be on something no one foresees. For the record, the S&P 500 is up 1.2% year-to-date.

No significant economic reports were released in the U.S. yesterday. The major news this morning is overseas and is the United Kingdom Supreme Court ruled by 8-3 against the government stating that Prime Minister May must seek parliamentary approval to invoke Article 50 which is the article for the UK to exit the European Union. The interpretation is this will soften the “hard” exit plan. European investors are taking the ruling positively and while the French and German markets are marginally higher the UK FTSE is up a big 1.16%. U.S. markets are yawning at the ruling with the Dow up a nothing 5 points.

Oil

• WTI chattering around $53.
• U.S. oil production has risen 6% since mid-2016.

WTI prices have been comfortable trading around the $53 mark for a couple of months now. Yesterday WTI lost 47¢ settling at $52.75 and Brent fell 26¢ closing at $55.23. For you oil hounds something very interesting happened this week. There’s evidence that oil from the offshore U.S. fields Mars and Southern Green Canyon is heading to Asian customers. This a very rare event given geological constraints. OPEC is indeed cutting production.

OPEC production may be decreasing but U.S. production isn’t. Per the EIA, U.S. oil production has risen by more than 6% since mid-2016, although it is still 7% below its 2015 peak. Current U.S. production is back at late 2014 levels.

Yesterday I wrote about the big increase in the U.S. rig count week on week. Well it wasn’t just here that the rig count leaped. Baker Hughes also reported Friday that the Canadian rig count rose 27, 8.6%, week-on-week to a total of 343 rigs which is a whopping 37% increase from this time last year. There’s about 50% as many rigs working in Canada as the U.S. right now. Folks, North American production is going to go up materially!

This morning WTI is up 55¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• Choppy day yesterday with price up 3.9¢ to $3.243.
• Colder weather possible mid-February.

Natural gas prices fell early in the day yesterday by 6¢ but rallied by 10¢ closing up 3.9¢ at $3.243. The bears have been feasting of late on the very warm weather from mid-late January pushing prices to an 8 day intraday low at $3.145, but that is changing. As a matter of background, from the time the very first winter forecasts were released in November more than one forecast talked of a late winter, i.e., a cold February and March. This has made traders very reluctant, even with the very warm weather we’ve seen in parts of December and January, to pile on the shorts. Well yesterday the first hint that cold weather could be coming to the Midwest in mid-February appeared on the radar. The forecast for the end of the 11-15 day period and the subsequent week is showing some quite cold weather hitting the northwest. Typically fronts move west to east so traders are anticipating that cold to move into the Midwest and possibly eastern U.S. There’s a lot of uncertainly with the intensity and direction of this cold “pig” but it’s getting the bulls stirred up and natty is up 6.6¢ this morning.

Elsewhere

Today marks a very important day in the U.S. and is worthy of celebration. Today back in 1935 canned beer made its debut. In partnership with the American Can Company, the Gottfried Krueger Brewing Company delivered 2,000 cans of Krueger’s Finest Beer and Krueger’s Cream Ale to faithful drinkers in Richmond, Virginia. 91% of the drinkers approved of the canned beer driving Krueger to give the green light to further production. And the rest is history. Cheers!