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Morning Energy Blog – May 13, 2016

Equities and the economy

The bulls beat up on the bears on Tuesday and the bears beat up on the bulls on Wednesday and yesterday they both left the battlefield and went back to their corrals and their caves and licked their wounds. The Dow rose 9 points to 17,720, the S&P 500 closed flat to Wednesday at 2,064 and the Nasdaq lost 23 points, 0.49%, dragged down by Apple which fell 2.35% yesterday. Chatter so let’s move on to fundamental economic news. As I mentioned yesterday, the Labor Department released its initial unemployment claims report stating claims last were up 20,000 week-on-week to 294,000 and much greater than expectations. Now this may be a one-off influenced by the strike by the Verizon workers but antennae have been raised and close attention will be paid to the next few reports.

Speaking of the Apple, it has fallen from the tree. For years Apple has been the world’s largest company by market capitalization, but that changed yesterday. Shares of the “fruit” fell below $90 for the first time in two years yesterday and in doing so the company ceded the title and bragging rights to Alphabet, the parent of Google. Apple ended the day valued at $494.8 billion while Google ended just a bit shy of $500 billion. What’s a billion here or there?!

Overnight the Asian major indexes all closed lower, but not devastatingly. China’s Shanghai was down 0.31% while Japan’s Nikkei was off 1.41% and Hong Kong’s Hang Seng finished in between the two. Across the pond, the European indexes have recovered from a weak start and are currently trading flat to yesterday’s close. Here in the U.S. with the Dow beginning the day down 19. More chatter.

Retail Sales come out this morning and while this number normally gets a lot of attention it will get an even greater amount after Macy’s disappointing Q1 earnings report earlier this week. As I’m sure you know, consumer spending accounts for ~70% of the U.S. economy.

Oil

Oil prices ground higher yesterday with WTI rising 47¢ closing at $46.70 and Brent up about the same, 48¢, at $48.08. The major news yesterday was the IEA’s (not our EIA) monthly Oil Market Report noting that the oil markets are showing signs of movement toward equilibrium. The report went on to explain that the recent climb in oil prices is largely the result of the unscheduled supply outages in Nigeria, Ghana and Canada equating to 1.5 million bpd. It added that higher output from OPEC offset some of this decline. In a separate report yesterday OPEC stated the group (I’m not going to call it a cartel anymore because that noun implies pricing power and as of now, it has none!) pumped 32.44 million bpd in April, up 188,000 bpd from March. The April output is OPEC’s highest since 2008.

This morning WTI is down 65¢ with the day traders trading the equity/oil correlation.

Blog Weather 5-13-16
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

Natural gas prices ended little changed closing 1.8¢ lower at $2.155. The EIA released its weekly storage report stating 56 Bcf was injected into storage fields last week which was right at expectations. Storage levels are currently 816 Bcf, 44%, greater than last year at this time and 813 Bcf, also 44%, greater than the 5 year average.

The weather forecast cooled off overnight with the wide swath of much above temperatures in the 11-15 time frame shrinking which is bringing the bears out of their caves and pushing natty down 5.7¢ this morning. I feel for you folks in the Northeast. You haven’t had any spring yet. Temperatures have averaged 57 degrees month-to-date which is 3 degrees below normal and almost 7 degrees below last year. Hang in there. Time is on your side.

As I’m sure you are well aware, the combination of low natural gas prices and EPA requirements the coal industry has been getting pounded. Per the EIA, coal production is down 32% versus a year ago. Coal carloads, a closely watched industry data point, are down 34% from a year ago. Ouch.

Elsewhere

All companies talk about customer service and the immense importance of it. Well here’s an example of how excellent customer service may have actually saved the life of an individual. Every day for three years Jean Wilson (82) of Memphis, TN would call her local Domino’s Pizza and order a large thin crust pepperoni pizza and two diet cokes. But one time, for three consecutive days, the pizza parlor didn’t get an order. That didn’t make sense to her regular delivery driver, Susan, who said, “She hasn’t called in three days. I gotta go. I gotta go.” Susan drove over to Ms. Wilson’s house and beat on the windows and tried to hear a voice but didn’t. She called 911. It turned out that Ms. Wilson had fallen in her home on the first day of the three and couldn’t get up or get to a phone. The story ends happily with Ms. Wilson having been taken to the hospital and eventually released. Who would have thought that pizza would have saved someone’s life!

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