Equities and the Economy:

• Dow closes at record high.
• May be seeing some profit taking.

Although the S&P 500 and Nasdaq closed lower, down 2 at 2,475 and down 41 to 6,382, respectively, the Dow managed to post a new record high gaining 86 points closing at 21,797. The latter was driven higher on earnings reports from Boeing and Verizon. What we may be seeing is that after a good week investors are taking some profits. Remember, before yesterday the Nasdaq was up a 20% for the year. That extrapolates to about 34% for the year. Ain’t gonna happen.

Regarding economic news, the Labor Department released its weekly first-time jobless claims and while the number of claims came in a little higher than forecast the absolute level remains near decade lows. In other fundamental news, good news came from the Commerce Department that durable goods orders rose 6.5% in June which was way above forecasts of 3.75%.

This morning I’m seeing the profit taking continue, especially in the Nasdaq which is down 26 points. If we’re looking for an excuse look to Amazon who’s earnings report missed forecasts by a mile. As a matter of perspective, usually companies earnings miss by pennies per share. Amazon missed by more than a dollar per share! Investors are going to want an explanation from Jeff Bezos.

Oil

• Prices hit 2 month high.
• EIA report still being felt in the market.

Oil prices rose for their 4th consecutive session yesterday with WTI closing up 29¢ at $49.04 and Brent up 52¢ at $54.19. This is the highest prices have been since May 30th. The driver continues to be the API and EIA reports Tuesday and Wednesday, respectively, showing huge declines in crude inventories. That being said, the EIA also said Wednesday that lower 48 production climbed 35,000 bpd hitting 9.005 million bpd, topping the 9 million bpd level for the first time in over two years. So how can production increase at these lower prices? Technology my friend. Technology. Take the Bakken in North Dakota. That basin is one of the, if not “the,” most expensive U.S. shale basins to produce. A year ago Bakken producers were getting $42/bbl with their break-even price about $36/bbl. Now producers are getting about $45/bbl and with improved technology and better drilling and fracking techniques their break-even cost is about $34/bbl. Simple math shows their margin has improved $5/bbl.

On the bullish side, Saudi Arabia, Kuwait and the UAE all said they will be cutting exports in August. However, that is not that stunning of an announcement for domestic demand materially increases in the Middle East in the summer to satisfy A/C loads.

This morning the bulls continue to push WTI higher with it up 27¢.

Courtesy of MDA Information Systems LLC

Natural Gas

• August Nymex contract expires.
• EIA storage report bullish.

The EIA released its weekly storage report stating 17 Bcf was injected last week which was way below what traders were looking for which was 25 Bcf. Last week’s injection was the smallest in nearly 4 months. This brought in some buyers pushing the August Nymex contract, which expired yesterday, up 4.5¢ to $2.969/MMBtu. The calendar 2019 strips and beyond were virtually unchanged. Storage levels are currently 9% below last year and 4% above the 5 year average. Forgive the redundancy, but $3.00 continues to be equilibrium.

Mexico is continuing its move toward deregulation. Recently its National Center for Natural Gas Control, which is responsible for managing the country’s natural gas and storage grid, concluded its first ever open season auctioning off capacity rights on the pipeline system. About 2.2 Bcf/s day of capacity was auctioned with 3.6 Bcf/d of bids. PEMEX, Mexico’s national energy company, was awarded 1.3 Bcf/d with Engie Mexico, ArcelorMittal and Shell Trading each getting about 150,000 mcf/d. The highest interest was in cross-border pipeline capacity from southern Texas to northern Mexico.

This morning the September Nymex contract begins its tenure as the prompt month and with no change in the weather forecast natty is doing nothing being up 1.0¢

Elsewhere

I’m not sure if you read it but Wisconsin-based Three Square Market made headlines this week. Three Square Market builds automated kiosks for snacks and meals. But it wasn’t what it makes is what made the news. It was their announcement that it would soon inject RFID microchips into more than half of its employees. The company says the implants, which are voluntary, will allow workers to open locked doors and pay for snacks and meals in the cafeteria similar to traditional security cards. That sounds like a really cool, convenient idea, but it’s also a little creepy. Obviously this raises privacy and security concerns, but the company says it’s not collecting any data on its employees. Additionally, the employee will decide what information it wants associated with their chip.

RFID chips, which are similar to chips implanted in pets to find them, aren’t the same as GPS chips. RFID chips need to be swiped or held close to a receiver to do things, like unlock a door. GPS chips can track you anywhere a GPS signal is available, which is pretty much anywhere. The kind of RFID chips being embed into employees uses essentially the same technology as your smartphone or tab to pay a credit card. They transfer encrypted signals to RFID readers to access your information. But like any technology, the chips aren’t completely secure.

The chips aren’t permanent. If you want to ditch the implant it’s similar to a splinter. You simply push on it and pull it out.

I’ll stick with a traditional security card.

On a logistical note, I will be traveling next week but will return next Friday so the next Morning Energy Blog will be Friday August 4th.  Have a great week!