Good Morning.  We got back from a wild week yesterday with everyone wondering if the bears would emerge from their hibernation over the weekend and pick up where they left off last Thursday. Well the market worked really hard to not make a lot of noise and not wake the bears yesterday and stocks moved quietly higher. The Dow rose 19 points to 16,400, the S&P 500 and Nasdaq did much better with the former climbing 17, 0.9%, to 1,904 and the latter adding a nice 58 points, 1.4%, 4,316. The Dow was heavily weighed down, and that’s an understatement, by IBM which reported Q3 earnings much worse than the market expected with the stock falling 7%. Remember, there’s only 30 stocks in the Dow and it’s price- weighted which means an expensive stock like IBM can materially affect the index. Without the effect of IBM’s decline the Dow would have been up 102 points!

There was a bit of economic news here in the states yesterday with The National Association for Business Economist’s October Business Conditions Survey (boy, that’s a long one!) showing 85% of those surveyed expect the economy to expand by over 2% next year which is up from 77% three months ago so that was mildly good news. Overnight China reported that 3rd quarter GDP was +7.3% y-o-y which was nicely better than had been hoped for and much better than had been feared. That positive news however didn’t translate into higher equity prices for the Shanghai Composite closed down 0.72% and Japan’s NIKKEI getting whacked off 2.03%. Hong Kong’s Hang Seng managed to squeak out a 0.08% gain.

This morning is starting out mildly positive with the Dow up 65 points being carried higher on European equities with their major indexes all trading materially higher. The latter is getting a boost on word out today that the ECB was readying a plan to buy corporate bonds. That would be QE amigos. The ying-yang of that is the euro is tumbling on the news (vs. the U.S. $).

A word of caution my friends. We have to be careful here. A move back up, a correction, to the 1,920 -1,943 area basis the S&P wouldn’t surprise me, and I would even say is expected. In that region we will see a lot of selling, i.e., “resistance.’ We need to get through that area for the bulls to gain confidence. The Dow is down 5.3% from its mid-September high so technically we haven’t formally seen a “correction” which is generally accepted as a 10% decline.

Although WTI saw a lot of intraday volatility, $1.93, it closed just 4¢ lower at $82.71. Brent fared worse losing 76¢ closing at $85.40. The oil markets are looking for any indication from OPEC that any of the countries will cut production (that would only be Saudi Arabia) but so far there haven’t been any cuts (other than the “environmentally” related one mentioned yesterday). OPEC meets next month in Vienna and I expect the meeting to be “lively.” This morning WTI is up $1.64 being carried higher by equities.

I’m not sure if you heard but Mr. Chistophe de Margerie, the President of the French oil company Total, died in a plane crash at Moscow’s airport yesterday. Apparently his plane ran into a snow plow. Now before we get all excited with conspiracy theories know that Mr. Margerie was a long standing supporter of the Russian oil ministry and argued against attempts to isolate Moscow from the rest of Europe.

Yesterday’s weather forecast brought out the bears who pushed natty down 9.6¢ yesterday settling at $3.670, a low for the year. If we all don’t get rain the next 2 weeks the weather over the entire nation is going to be spectacular, which brought out the matador yesterday. That being said, natty prices are getting awfully low with yesterday posting the lowest price of the year. We’re on the heels of winter. Storage levels are below last year and the 5 year average. And we’re below coal prices, although this is somewhat less important now that summer has passed. Natty is down 2.4¢ as I write.

North Dakota is getting serious about flaring natural gas. For reference, North Dakota’s oil production has risen from 230,000 bpd in January 2010 to more than 1,130,000 bpd this past August. This amazingly rapid expansion in production can be reasonably managed for oil because you can “put it in a bucket.” You cannot do the same for natural gas and the pipeline infrastructure in the state has materially lagged the explosion in wells drilled. This is not unusual because midstream companies don’t come into an area until the exploration companies drill enough wells to make it worth laying new pipe and building new processing plants. As much as 37% of North Dakota’s natural gas has been flared representing approximately $1 million per day. You can imagine the state of North Dakota is not happy being they lose the taxes associated with the flared gas but royalty owners are downright irate because they don’t get paid royalties on flared gas. Royalty owners have filed at least one class action law suit on this matter. Things are changing though. The North Dakota Industrial Commission (it has jurisdiction) has now established targets to decrease the amount of flaring. The first target of 26% is effective this quarter with continued decreases reaching 10% by 2020. The industry knew this was coming and as of August flaring was down to 28%. Companies continue to scramble to get facilities built. The last thing a producer wants is his oil production (which is what he’s really after) shut in because he can’t get the natural gas to market with the latter paying in the area of $3.00, or less, at the well head. Have a good day.