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Morning Energy Blog – October 11, 2017

Equities and the Economy:

• Trump trade at work.
• Dow logs 47th record high in 2017.

Driven by the optimism tax reform is coming, investors have been buying U.S. equities in record amounts, literally. Yesterday all three of the primary stock indexes gained and all three touched fresh intraday record highs. The Dow rose 70 points ending at 22,831 marking its 47th record high finish in 2017 and only 169 points from 23,000! Barring a black swan event it’s a given we’ll hit that! The S&P 500 added 6 points closing at 2,551 and the Nasdaq finished up 8 points at 6,587. The S&P has risen in 9 of the last 11 sessions and the Nasdaq has gained in 10 of the past 11.

We’ve got cheap money thanks to the Fed’s “accommodating” monetary policy as well as other developed countries central banks, the U.S. economy is on solid ground and Europe is as well, the belief by investors there will be tax reform the impending earnings seasons is expected to be strong. It doesn’t get any better than this. And you better enjoy the ride! Don’t take my word for it. Morgan Stanley yesterday said this equity market rally “has reached epic proportions.” Per the investment banking firm, “We say this not as hyperbole, but based on quantitative perspective.” And it’s not just us. European equities are up 20% this year. Basically every country is positive for the year.

Today the Fed will release the minutes of the September FOMC meeting. Investors will be parsing it for clues on how the Fed will be winding down its massive balance sheet and direction on interest rate hikes.

This morning the Dow is down 7 points. Chatter.

Oil

• Prices settle at one week high.
• Saudi Arabia to cut exports in November.

Oil prices notched a one week high yesterday with WTI closing up a hefty $1.34 at $50.92 while Brent added 82¢ settling at $56.61. Prices got a boost on Saudi Arabia’s announcement it would cut November exports by 7% compared to the same period last year. There were two other factors supporting prices. The Bureau of Safety and Environmental Enforcement said that as of yesterday 59% of Gulf oil production was still shut-in due to hurricane Nate. Then there was OPEC’s Secretary-General Mohammed Barkiindo’s request yesterday that U.S. shale producers to take “shared responsibility” for the global over-supply and help curtail global oil supply to restore stability to the market.

Yesterday Ian Taylor, Chairman and Global CEO of the Vitol Group, the world’s largest independent energy trader, told Reuters Vitol holds the view that U.S. oil output could be set for one last spike in 2018 before growth flattens for a number of years as the rising costs make a chunk of production uneconomical. As the author of this Blog I’m going to take an editorial liberty here. I disagree. The U.S. oil and gas producer has time and time again proven to be resilient bringing amazing technology to the industry. In 1956 M. King Hubbert presented a theory that got widely accepted that U.S. oil production would “peak” in about 1970 at 9.6 million bpd and in 2017 U.S. production would be about 1.4 million bpd. Dr. Hubbert never saw horizontal drilling and hydrofracking coming! Today the U.S. produces 9.5 million bpd, a two year high.

This morning WTI is up 9¢. Chatter.

blog weather 10-11-2017
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• Prices bounces off 7 week low.
• GOM production slow to return.

A delay in the return of Gulf natural gas production has made for a strong cash market the last couple of days and with prices being at 7 week lows buying came in. Yesterday the November contract closed 5.8¢ higher at $2.891. Prices have rallied 12¢ over the past few days. Cash is trading flat to the November contract where normally at this time of year the November contract trades at a premium to the cash day market. The fact that not all GOM production has returned is definitely impacting this relationship and has brought in some buying.

The weather forecast continues to show above normal temperatures through October 25th which will bring in some A/C load in the south. If the trend continues it should make for a great Halloween evening!

This morning the bulls remain in control with natty up 6.2¢.

Elsewhere

There are a lot of cities through the nation named for other cities. Examples: Paris, Texas and there are 17 cities name for Rome. But approximately 90 miles northwest of Lubbock, Texas is the only city on the planet Earth to be named “Earth.” There is a Black Earth, Wisconsin, a Blue Earth, Minnesota, a White Earth, Minnesota and Maryland, an Earth City, Missouri and a Middle Earth, Maryland. But only one city in the U.S. is named “Earth.” Earth, Texas was established in 1924 by rancher William E. Halsell. There are numerous stories how the town came to be named Earth. One is the first settlers decided to call the town Tulsa but the postal authorities rejected the name because Oklahoma already had a Tulsa and subsequently the settlers decided on Earth. Another is that Ora Hume Reeves , who owned the new town’s hotel, said, “We’ve got more earth here than anything else. Let’s call it Earth.”

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