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Morning Energy Blog – October 20, 2017

Equities and the Economy:

• Dow and S&P 500 post another record high.
• Weekly unemployment claims lowest in 44 years.

U.S. equities overcame serious selling pressure early to close pretty much unchanged. The Dow, which was down more than 100 points at one point, clawed its way back to close up 5 points at 23,163. The S&P 500 added a single digit finishing at 2,562. The gains for the two indexes were enough to take them to another record high. The Nasdaq took it on the chin falling 19 points to 6,605. We also survived the ghost of 1987. Yesterday was the 30th anniversary of 1987 stock market crash, aka Black Monday, which saw the Dow fall by over 22%, its biggest one-day drop on record.

The Labor Department released its regular weekly initial jobless claims report stating claims fell a stunning 22,000 last week to 222,000. This is the lowest number of weekly unemployment claims in 44 ½ years! Last week marked the 137th consecutive week that claims remained below the 300,00 level, which is associated with a robust labor market. This is the longest stretch since 1970. This is even more remarkable considering the U.S. population in 1973 was 212 million and today it is 323 million. This is truly an amazing statistic. Can you say interest rate increase (in December)?

Offsetting this phenomenal statistic a bit was the Conference Board’s Leading Economic Indicators report which fell 0.2% in September to 128.6. Wall Street had universally expected the index to have risen.

The Dow is up a nice 76 points this morning driven by the news of the U.S. Senate last night passing a budget blueprint for the upcoming fiscal year which places President Trump another step closer to realizing his tax reform aspirations.

Oil

• Prices close lower on profit taking.
• November Nymex contract expires today.

After closing higher for 4 consecutive sessions lifting prices to their highest level since late September, some profit taking came in and oil prices closed lower. WTI fell 75¢ to $51.29 and Brent dropped 92¢ to $57.23. Tensions in Iraq relating to the Kurdish independence vote and unknowns surrounding the Iranian nuclear agreement have increased the fear premium in the market. Regarding Iraq, reports are that the Kirkuk oil fields are restarting production. About 200,000 bpd was shut-in when Iraqi national troops entered the region pushing out the Kurds.

WTI is continuing to slide this morning as the U.S. dollar rises. The November contract, which expires today, is down 24¢.

blog weather 10-20-2017
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• Prices rebound to close higher.
• Storage report at expectations.

The bulls looked to be corralled early in the day with the November Nymex contract breaking the substantive support at $2.85 and trading as low as $2.773 but in the afternoon buying came in pushing natty up enough for it to close higher on the day by 1.9¢ at $2.873. Downward price pressure was applied early in the day by the EIA storage report stating 51 Bcf was injected last week which was a couple of Bcf greater than expectations.

The weather forecast continues to be benign but with winter coming and traders knowing we’ll be going into this winter 3-5% less than last year as well as LNG exports increasing as new capacity comes on along with the continual decommissioning of coal plants in favor of gas plants, they’re not very excited about pushing prices too much lower. Additionally, there’s a big spread between current prices and forward prices. For example, the November contract is trading $2.891 this morning while March ’18 is trading 30.3¢ higher at $3.194.

November gas is up 1.9¢ as I write.

Elsewhere

Do you have a passport? If not, you might seriously consider getting one. Come January 22, 2018, residents of 9 states will need a passport to board ANY flight, domestic or international, according to new TSA guidelines. The 9 states are Kentucky, Maine, Minnesota, Missouri, Montana, Oklahoma, Pennsylvania, South Carolina and Washington. Per the REAL ID Act of 2005, each of these states does not currently issue a state ID that satisfies federal ID minimum security requirements. These states have about 3 months to make changes to their state IDs or drivers licenses so they meet federal government standards. Otherwise, you need a passport. There are other forms of IDs that work including permanent resident cards (green cards) or military IDs. The good news is some of these states are in the process of updating their ID situations before the deadline. However, requirements get even stricter come 2020 and even more states will fall into “state ID does not qualify to fly” category. As a heads up, it takes 4 to 6 weeks to get a passport processed. Doing simple math and being conservative, you have about 6 weeks to apply for a passport. Get going!

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