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Morning Energy Blog – October 5, 2017

Equities and the Economy:

• 3rd consecutive closing high for the three major indexes.
• ADP releases jobs report for August.

While the gains were marginal yesterday they were enough for the three major stock indexes to post new record highs. The Dow rose for the 6th consecutive session adding 20 points to close at 22,661. The S&P 500 eked out a gain of 3 points rising for a 7th straight session ending at 2,638. The Nasdaq Composite advanced 3 points to 6,535. The Russell 2000, which has been on a tear the last 30 days, broke its string of 8 all-time high finishes ending down 0.3%.

The economic data continues to be positive. Yesterday The Institute of Supply Management (ISM) reported its index for service sector activity rose to 60 in September from a 55 in August. Significance? This ties the highest reading for this index has been in 2 years.

The ADP Research Institute released its very closely watched private employment report noting that 135,000 jobs were added in September. This was right where economists were forecasting but down a little. Hurricanes Harvey and Irma are to blame. Looking through the storms, the job market remains strong. This report is the precursor to tomorrow’s big Labor Department employment report for September.

It wouldn’t surprise me if today was a quiet day with investors waiting for tomorrow’s Labor report. The Dow is up 11.

A word of caution here, at least for the short term. One of the indexes I follow is CNN’s Fear & Greed Index. It hit 92 yesterday. This is the highest level it’s been in 5 years. The equities boat is listing heavily to the over-bought side right now. Again, this is a short term (multi-week) index.

Oil

• Prices post 3rd consecutive day of losses.
• U.S. crude exports jump.

Oil prices slipped for a 3rd consecutive day yesterday with WTI closing down 44¢ at $49.98 and Brent settling off 20¢ at $55.80. While the weekly DOE crude and products inventory report was bullish showing crude stockpiles fell sharply by 6 million barrels last week and much larger than the forecast of a decline of 750,000 barrels, the reason for the draw was that U.S. crude exports rose by a big 1.98 million bpd last week to 13.888 million barrels driven by the recent huge price spread between Brent and WTI. With increasing U.S. production that spread should markedly narrow.

Russian President Vladimir Putin went on the record yesterday saying the production cuts should be extended through the end of 2018. I can see a big smile on the face of the U.S. producer.

This morning it’s just noise with WTI up 17¢.

blog weather 10-5-2017
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• Rumors of gas being shut-in.
• Prices pop.

After resting on technical support Tuesday a rumor that some gas supply in the northeast was being shut-in triggered a stronger cash market popping prices. Also helping prices were a pick-up in demand by electric generators to satisfy A/C demand resulting from the current warm temperatures in the east as well as an increase in LNG feedgas. The November Nymex contract closed up 7.4¢ at $3.256. The market eased once we hit that magic $3.00 level.

Today is Thursday and of course that means we’ll get the weekly storage report. Traders are looking for an injection 47 Bcf which is materially less than last year at this time’s 76 Bcf and the 5 year average of 91 Bcf.

Natty is up marginally this morning, 1.7¢.

Elsewhere

Jamie Dimon, CEO of JPMorgan & Co., may not like Bitcoin saying the cryptocurrency “won’t end well” and that he would fire any employee trading Bitcoin for being “stupid,” but his sentiments apparently aren’t shared by his counterpart at Goldman Sachs, Lloyd Blankfein. According to The Wall Street Journal Goldman is considering a new trading operation devoted to cryptocurrencies which would make it the first big Wall Street firm to deal directly in digital currencies. Goldman’s lending partner Fidelity is also conducting experiments with Bitcoin.

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