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Morning Energy Blog – October 19, 2017

Equities and the Economy:

• Dow closes above 23,000 for first time!
• Al three major indexes finish at record highs.

Thanks to IBM the Dow closed over 23,000 for the first time ever. The blue-chip index posted a hefty 160 point gain, 0.7%, ending at 23,158 thanks to IBM who’s stock price popped a huge 8.9% yesterday after the tech giant posted better than expected quarterly results. The Dow logged it 4th straight daily rise as well as its 13th gain in the past 16 trading days. It took only 54 trading days for the index to rise from 22,000 to 23,000. That’s the 3rd fastest 1,000 point rise in history.

While both the S&P 500 and Nasdaq both closed higher, the gains were much more muted. The S&P finished up 2 points at 2,561 and the Nasdaq added a point to 6,624. The S&P has risen for 4 consecutive days as well as posting its 14th positive session in 17. You’re having a very, very good year amigo! All the indexes are posting amazing gains! For the year the Dow is up 17.2%, the S&P 14.4% and the Nasdaq a whopping 23.1%.

So what’s the drivers? In the broader sense the economy continues to improve, albeit at a plow horse pace, money is cheap and investors are banking on tax reform. Additionally, globally economies are improving. Europe is creating more demand for goods from China which is obviously helping China. So what we have is that China, Europe and the U.S. are in a synchronized global economic recovery. That’s obviously positive for the longer term, but the recent move up has been on corporate earnings. So far quarterly earnings are beating expectations coming in at 12% which is bringing in the buying.

This morning European stocks are on the defensive with UK retail sales coming in below expectations and tensions very high over the Catalonia independence issue. The Dow is down 90 points.

Oil

• Prices eke out 3 week high.
• Geopolitical tensions increase fear premium.

Oil prices closed slightly higher yesterday with WTI settling up 16¢ at $52.04 and Brent closing 27¢ higher at $58.15. The gains were marginal but enough for oil prices to close at 3 week highs. Prices have gotten support of late from the Kurdish independence referendum a few weeks ago voting for independence and their own country which would take land from Turkey and Iraq. Those two countries and Iran oppose the independence movement which now seems to have been a political blunder for all it did was bring Iraqi national troops into the region to take over oil fields which had been under the Kurds control. Most importantly for the Kurds, they’re now not receiving the revenue from that oil. The Kurds are looking for international support, especially from the U.S. Both the Kurds and Iraqis have helped in ISIS’ defeat in Iraq and President Trump is saying he’s staying out of the situation.

The DOE released its weekly crude and inventories report yesterday. Crude inventories fell much more than expectations decreasing by 5.7 million barrels last week. Gasoline stockpiles built less than forecast at 900,000 barrels while distillate, which is mostly diesel, inventories rose by 500,000, way more than the expected decline of 1.6 million barrels. Things were whacky last week because of the impact of hurricane Nate. This morning WTI down 73¢ primarily on some profit taking after the last few days rally.

blog weather 10-19-2017
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• Front month price gets whacked.
• Calendar strips little changed.

Natural gas prices of late have been heavily dependent on the weather forecast and recent forecasts have been bearish natty prices. Yesterday the November Nymex contract got bludgeoned losing 10.8¢ closing at $2.854. However, all the action is in the front months for the calendar 2018 strip was off only 2.8¢ and calendar 2019 settled basically unchanged. The front month is back at the $2.85 level which has proven to be solid price support.

Today is Thursday which means its EIA storage report day. Traders are looking for an injection of 53 Bcf. This compares to an injection of 77 Bcf last year at this time and the 5 year average of 78 Bcf.

The natty market is very quiet right now being up 0.4¢.

Elsewhere

Here’s some trivia I bet you didn’t know. It was on July 2, not July 4th, when the second Continental Congress which was assembled in Philadelphia, formally adopted Richard Lee’s resolution for independence. On July 4th Thomas Jefferson’s, who was assigned to write the Declarations of Independence because of his writing prowess, edited Declaration of Independence was adopted. I bet you’re saying, “I knew that!” But that is not the trivia I’m referencing. When the Second Continental Congress was debating independence the assembly required that the independence resolution pass unanimously. I’m sure not the least of reasons for this was because declaring independence from Great Britain was treason and King George III would have every one of them publically hung. On July 1st 1776 a vote was taken and a majority voted for independence, but it was not a unanimous vote. A debate ensued and the pro-impendence faction managed to get everyone to agree a final vote would be taken the next day, July 2nd. July 2nd came and the resolution passed unanimously with 12 delegations voting for independence. But wait a minute! There were 13 delegations representing the 13 colonies! What happened? The delegation from New York abstained unsure how their constituents would wish them to vote! New York did not decide to join until July 19th.

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