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Morning Energy Blog – March 31, 2016

Equities and the economy

U.S. investors continued buying equities yesterday on Janet Yellen’s releasing of the doves (with respect to monetary policy) with the “promise” that the Fed is in no hurry to raise interest rates. The major U.S indexes marked a 3rd day of gains with the Dow closing up 84 points, 0.5%, at 17,717, the S&P 500 added 9, 0.4%, to 2,064 and the Nasdaq climbing 23 points, 0.5%, finishing at 4,869. It’s been a very, very good month for us folks!. The Dow has closed positive 17 times this month, the most in a March since March 2010. The S&P has logged 15 winning sessions this month, the most number of winning days since October 2013. We’ll take that all day every day! Folks, we’re seeing a classic Fed-driven rally for riskier assets with the weaker dollar, which fell on Yellen’s words, providing support for these assets. European stocks took a 1% hit on the exact same news. It’s what I’ve been saying for months, no years, now. The Fed, ECB, Bank of Japan, and Chinese government are all chasing anemic global demand growth and each is taking their turn doing financial engineering to stimulate their economy which they consciously know weakens their currency to make their exports cheaper. You watch. In the near future the ECB or BOJ is going to announce some form of monetary easing. It will be real interesting to see what they do. The BOJ is already at negative interest rates. I guess the ECB could do that. The market’s best friend continues to be the Fed and central banks around the world, all to the joy of investors.

Turning to the economic data, as I mentioned yesterday the ADP Research Institute reported that private employers added 200,000 new workers in March which was impressive albeit in line with economists’ expectations. The manufacturing sector added very few jobs but the construction, retail and shipping sectors posted significant gains.

The major indexes closed mixed overnight but European equities are getting hit for reasons mentioned previously. Watch the ECB! U.S. stocks are doing nothing this morning trading flat to yesterday’s close. The next big event will be Q1 earning season reporting which begins with Alcoa on April 11th.

Oil

Oil prices haven’t been doing much of late trading between $36 and $42 for the last 3 weeks. $40ish is a comfortable number, for now. In the mid-$40’s basis the front month the deferred contracts will be in the upper $40’s to $50 and that will definitely stimulate drilling which isn’t needed at this time with the current global over supply. Below $36 producers can’t make any money (they ain’t making much now!) and bankruptcies will be everywhere, and neither producers nor their lenders (banks and private equity firms) want that. Recall that at even at current pricing levels U.S. oil production is marginally declining. Yesterday in the morning WTI traded higher on the coattails of higher equities and a weaker dollar as well as on the marginally bullish weekly DOE crude and products report. However, an OPEC report released later in the day noted production rose 100,000 barrels for its member countries. Iran increased supplies and Iraq is producing near record levels. WTI ended the day basically unchanged up 4¢ at $38.32. Brent settled up 12¢ at $39.26.

This morning WTI is trading flat to yesterday’s close, up 6¢. Chatter.

Blog Weather 3-31-16
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

Impressive. Just downright impressive. Despite record natural gas storage levels natural gas prices continue to grind higher. Yesterday the May contract as its first day as the prompt month rose 1.5¢ closing at $1.996. Late last week we were trading $1.75. Now, 2 bucks, which is a 6 week high. Once again, impressive.

Today the EIA releases its weekly storage report. If you recall, we had an injection of 15 Bcf last week. This week the market is looking for a withdrawal of 30 Bcf. Remember we had that cold front come through the upper Midwest and Northeast last week markedly increasing HDD’s. It’s all quiet on the natural gas front this morning with natty up 1.4¢ in May but all the other contracts are down marginally.

Elsewhere

Last Sunday Easter was celebrated. But did you ever think about the word? Kind of a strange one, eh? Easter is thought to be an evolution of the word Eostre which was the name ancient Anglo-Saxons gave to their goddess of offspring. Each year in the spring they would have a carnival commemorating their goddess. The word carnival possibly originated from the Latin ‘carne vale’ meaning “flesh, farewell” or “meat, farewell.” The offerings were rabbits and colored eggs, bidding an end to winter. As it happened, the pagan festival Eostre occurred at the same time of year as the Christian observance of the Resurrection of Christ and it didn’t take the Christian missionaries long to covert the Anglo-Saxons when they encountered them in the 2nd century. The offering of rabbits and eggs eventually (thought to be in the 8th century) became the Easter bunny and Easter eggs.

Prior to 325 AD, Easter was variously celebrated on different days of the week including Friday, Saturday and Sunday. In the year, the Council of Nicaea was convened by emperor Constantine. It issued the Easter Rule which stated that Easter shall be celebrated on the first Sunday that occurs after the first full moon on or after the vernal equinox. The “full moon” in the rule is the ecclesiastical full moon, which is defined as the 14th day of a tabular lunation, where day 1 corresponds to the ecclesiastical New Moon. It does not always occur on the same date as the astronomical full moon. The ecclesiastical “vernal equinox” is always on the 21st of March but Easter Sunday is the Sunday following the Paschal Full Moon date of the year. (I had to read this three times to figure all that out!)

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