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Morning Energy Blog – October 30, 2017

Equities and the Economy:

• S&P and Nasdaq log new record highs.
• Q3 GDP posts solid growth for second consecutive quarter.

On Friday both the S&P 500 and Nasdaq set new record highs. The S&P ended 21 points higher at 2,581. The Nasdaq advanced a whopping 144 points (2.2%!) ending at 6,701 logging its best daily percentage gain since November 7th. The Dow had a decent day as well gaining 33 points finishing at 23,434. Corporate earnings have been the driver of late, and so it was on Friday. The entire stock market got a boost from better than expected quarterly earnings from Amazon, Microsoft, Alphabet and Intel. For the week the Dow gained 0.5% advancing for its 7th straight week. The S&P posted a 0.2% rise also marking 7 consecutive weeks of gains, its longest since late 2014. The Nasdaq rose 1.1% on the week, its 5th consecutive gain.

The major economic report on Friday was the Commerce Department announcing Q3 GDP rose at a 3.0% annualized rate and well above forecasts of 2.4%. Consumer spending grew by 2.4% and this too was above consensus. In other data, the University of Michigan’s consumer sentiment index ended the month at 101 and while this was expected, the positive surprise came in the “expectations” component which rose to 91 for October from 84 in September. Interpretation: the consumer is feeling pretty good.

Stocks around the world are little softer this morning and it’s the same here with the Dow down 61.

The Fed meets tomorrow and Wednesday for its regularly scheduled monetary meeting. No change in policy or interest rates is expected.

Oil

• Brent settles at highest price in two years.
• Belief production cut agreement will be extended supporting market.

December Brent closed up a big $1.14 on Friday at $60.44, its highest close since July 2015. WTI was strong too finishing up $1.26 at $53.90 marking a nearly 8 month high. Traders are more and more believing that the current OPEC+ production cut accord will be extended beyond March 31st to the end of 2018 with heavy-weight producers Saudi Arabia and Russia appearing to be in agreement. Additionally on the supply side, data continues to show U.S. stocks are declining. On the demand side, U.S. GDP data and solid global economic data support the notion global demand is strong, especially in Asia, primarily China and India.

There’s a belief in the market that U.S. production growth will not be enough to make up the gap created by demand growth and OPEC and friends supply cuts. On Friday Baker Hughes reported the U.S rig count fell by 4 with oil directed rigs up by 1 and gas directed falling 4

The U.S. dollar hit a 3 month high on Friday vs. a basket of currencies. This makes commodities priced in the greenback more expensive to traders and all other things being equal, is bearish. But then, when are “all other things equal”?!.

This morning its quiet. WTI is up 15¢.

10-30-17
WEATHER BAR IMAGE FOR BLOG-
Courtesy of MDA Information Systems LLC

Natural Gas

• November Nymex expires very weak.
• Production and weather weigh.

The November Nymex contract expired very weak on Friday closing down a whopping 13.8¢ at $2.752. That’s an 8 month low. Some folks are going to get some cheap natty and power for November. Two factors pushed prices lower. First, on Friday morning the overnight weather forecast shifted markedly warmer particularly for the 6-10 period. Second, late last week data showed U.S. production hit an all-time high of over 75 Bcf/d. That combination punch landed squarely on the bull who went down for the count. U.S. production is rising as more and more pipeline capacity becomes operational in supply constrained areas, particularly in the northeast. The biggest of these is the Rover pipeline which runs from eastern Ohio (Utica region) through northwest Ohio to Michigan then turns northeast and ends at Dawn, Ontario which is a major natural gas hub in Canada.

The weather forecast this morning is little changed from Friday, and the December Nymex contract is starting its first day as the prompt month quietly, up 0.8¢

Elsewhere

$17.8 million. That’s was the price that a stainless-steel Daytona Rolex watch belonging to Paul Newman sold for at auction last week setting a new record for the most expensive watch ever sold. The previous record was $11.1 million for a stainless-steel Patek Philippe sold in November. Newman’s former property went to a bidder on the phone who chose to remain anonymous. The opening bid was $1 million. The very next bid was $10 million. 12 minutes later the auction was over.

Newman got his watch, a Rolex Cosmograph Daytona, reference #6239, made in 1968, as a gift from his wife, actress Joanne Woodward. She had the back engraved “DRIVE CAREFULLY ME.” He wore it everywhere including in promotional materials, magazine and documentary footage. It became so synonymous with the Hollywood legend that vintage-watch aficionados dubbed the model after him. The “Paul Newman” Daytona is among the most coveted watches in the market. In May, an 18-karate gold “Paul Newman” Daytona fetched $3.7 million.

The fate of Newman’s watch became a mystery after it disappeared from the actor’s wrist in the 1980’s. It turns out that in 1984 the star gave it to James Cox, a college student who dated Newman’s daughter, Nell. (lucky him!) Cox said he wore it for years but as he noticed the price of vintage watches skyrocketing he put it in a safe deposit box. Cox decide to sell the piece, in part, to raise money for the Nell Newman Foundation, where he serves as Treasurer. The charity supports causes including the environment, sustainable agriculture and education.

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