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Morning Energy Blog – July 24, 2017

Equities and the Economy:

• Earnings driving equities.
• Nasdaq snaps 10 session win streak.

After hitting new record highs earlier in the week, on Friday the major indexes closed marginally lower with the Dow off 34 points to 21,580, the S&P 500 sliding a single point to 2,473 and the Nasdaq ending a 10 session winning streak closing down 2 points to 6,388. The tech-heavy index has had an incredible 41 record closes in 2017. Youza! Weekly performance for the major indices was a mixed bag with the Dow falling 0.3%, the S&P gaining 0.5% and the Nasdaq adding a hefty 1.2%.

Investors have recently been taking their ques from corporate earnings and while earlier in the week the likes of Microsoft, Honeywell and Morgan Stanley took stocks higher, on Friday subdued guidance from General Electric Company cooled investors buying enthusiasm.

A word of caution amigos. I mentioned this last week as well. Wall Street’s Fear Index, the VIX, closed on Friday as it second lowest finish ever. Actually, intraday if flirted with its lowest close ever. I interpret this as investors are getting a little too overconfident. A little too self-assured. A little too cocky. You might want to look at your portfolio and make sure it’s balanced.

This morning stocks are beginning the week pretty much unchanged with the Dow down 9 points. Other than earnings the primary driver this week is the FOMC meeting tomorrow and Wednesday. There is no post-conference news conference so I don’t expect any change in monetary policy. Typically changes happen at sessions with news conferences so the Fed Chair, in this case Janet Yellen, can explain the Fed’s actions.

Oil

• Report issued OPEC production will rise in July.
• Prices get whacked.

On Friday Petro-Logistics issued a report that despite OPEC’s agreement to cut production, it is forecasted to rise in July by 145,000 bpd taking the cartel’s combined output to 33 million bpd. The gains came from Saudi Arabia, the UAE and Nigeria. On the heels of the report oil prices got whacked closing at their lowest level of the week. WTI finished down $1.15 at $45.77 and Brent fell $1.24 to $48.06. For the week WTI lost 2.1%.

The Petro-Logistics report came on the advent of today’s meeting of OPEC and Russia in St. Petersburg to discuss compliance and how to deal with rising output from Libya and Nigeria. Being St. Petersburg is 8 hours ahead of U.S. Central time the meeting has been well under way. OPEC’s Secretary General, Mr. Barkindo, said that while he fully expects the long awaited global “rebalancing” to come by the year’s end, the progress toward the goal has been “disappointing.”

Baker Hughes released it weekly rig count report on Friday noting both the oil and natural gas rig count each dropped by 1. There are currently 950 rigs working here in the U.S. which compares to 447 at this time last year. For reference, the recent lowest rig count was in May 2016 at 404. You can do the math.

This morning WTI is bouncing back up 50¢.

One last thing. The U.S. dollar has been very weak this year. It’s down a material 6.4% vs. a basket of foreign indices. This should be bullish for oil.

Weather 7-24-17
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• Production creeping higher.
• Prices fall.

A combination of a return to normal temperatures and production continuing to inch higher brought in the bears on Friday who pushed August natural gas down a hefty 7.3¢ to $2.970 and its lowest settle of the week. Natural gas pipeline projects in the Marcellus and Utica have slowly become operational which is allowing constrained gas to get to market taking northeast production 1.4 Bcf/d greater than last winter’s average. And more pipeline capacity is coming. The really big project, Rover, which is 3.25 Bcf/d and moves gas from eastern Ohio to Michigan and into Canada, will put its phase 1 into operation at this summer’s end.

This morning the weather forecast is showing absolutely no above normal temperatures for the next two weeks for the Midwest and east which has brought in a little selling and natty is down 3.2¢.

Elsewhere

The British Open golf tournament, one of the four “majors” of golf, ended yesterday and congratulations to 23 year old Jordan Spieth on his victory! His shooting 5 under in the last 4 holes was amazing! Here are some fun facts about the tournament.

• Despite the term “British,” the tournament was not held outside of Scotland until 1984, 30 years after the first tournament.

• The first champion was J.H. Taylor. His purse: 30 pounds sterling.

• Harry Vardon holds the record for the most British Open victories, 6. He also invented the Vardon, or overlapping, grip.

• Tom Morris had the record for the largest margin of victory, 14 strokes, in 1862 which held for a whopping 138 years! Then a guy by the name of Tiger Woods came along in 2000 and won by 15 strokes.

• Gary Player is the only golfer in the 20th century to win the Open in three different decades. He also holds the record for the most appearances, 46!

• The first American to win the British Open was Jack Hutchison in 1921. Interestingly, he won it as a naturalized U.S. citizen. He was born in England.

• Louis Oosthuizen won in 2001 blowing away the competition leading for the final 48 of 72 holes. What’s interesting here is that he didn’t even make the “cut” in his previous 8 majors.

• Ben Curtis won in 2002. Get this. He was a PGA tour rookie that year ranked 396th in the world going into the tournament.

• The trophy is officially named the Championship Cup, though it’s widely referred to as the “claret jug.” Claret is a French dry red wine. The trophy was designed to look like the silver jugs used to serve claret in the 19th century.

• The winner of the first dozen Opens was presented with a red Morocco belt with silver clasps which he got to keep for the year until the next tournament. Under the original rules, if a player won three times in a row he got to keep the prize. Tom Morris won 4 Opens from 1868-1872. That meant there was nothing to play for in 1871, so no Open was held that year.

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