​Daniel Cullinane CPA                                   p 848-250-9587                                                                                                                                     

CRUDE PRICES REMAIN STEADY

GM SELLS MORE CARS IN CHINA THAN US

DOW HITS 25,000

​JANUARY NEWSLETTER 2

General Motors Co. (NYSE: GM) reported sales of 4.04 million vehicles in China in 2017, a third more than the 3.002 million the company sold in the United States. Included in the total for China are sales of Buick, Cadillac and Chevrolet brands, as well as sales made by the company’s joint ventures with China-based automakers Wuling and Baojun.

2017 marks the sixth consecutive year that China has been GM’s top market. Sales of the Cadillac, Buick and Baojun brands set new domestic sales records.

Sport utility vehicle sales soared 37% year over year in 2017, and overall sales rose 4.4% for the year.

GM’s best-selling brand was Buick, up just 0.2% in 2017 to 1.18 million units. For the month of December only, however, Buick sales rose 20.8% year over year.

Sales of the Chevrolet brand rose 4.2% for the year to nearly 550,000 units. In December Chevy sales rose 6.6% year over year to 78,661 units.

Cadillac sales increased by 50.8% compared with 2016 sales to nearly 175,500 units. December-only sales rose 29.5% to 17,217 units.

Matt Tsien, GM executive vice president and president of GM China, said:

Consumers’ trust in our brands will help us achieve sustainable and high-quality growth going forward. We will continue to bring the right products and technology to market to meet increasingly diverse demands for personal mobility.

Sales of the Baojun brand rose 44.8% to 996,629 units, compared with 2016 sales. The increase was led by the 510 small SUV, which was launched in February and became the brand’s best-selling nameplate in 2017. Baojun also benefited from making automatic transmissions available across its mainstream lineup ahead of its entry-level rivals.

GM also launched two zero-emissions vehicles in China last year, the Buick Velite 5 extended-range and the Baojun E100.

GM stock traded up 2.5% at $43.88 in the noon hour Thursday, in a 52-week range of $31.92 to $46.76. The stock’s 12-month consensus price target is $47.00.

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Thursday morning, showing that U.S. commercial crude inventories decreased by 7.4 million barrels last week, maintaining a total U.S. commercial crude inventory of 424.5 million barrels. The commercial crude inventory remained in the middle of the average range for this time of year.

Wednesday evening the American Petroleum Institute (API) reported that crude inventories fell by about 5.0 million barrels in the week ending December 29. Gasoline inventories rose by 1.8 million barrels and distillate stockpiles rose by 4.3 million barrels. For the same period, analysts polled by S&P Global Platts had consensus estimates for a decrease of 5.7 million barrels in crude inventories, a rise of about 1.3 million barrels in gasoline and an increase of 2.0 million barrels in distillate stockpiles.

Total gasoline inventories increased by 4.8 million barrels last week, according to the EIA, and remain above the upper limit of the five-year average range. U.S. refineries produced about 9.7 million barrels of gasoline a day last week, down by about 500,000 barrels a day compared to the prior week. Total motor gasoline supplied (the agency’s proxy for demand) averaged about 9.2 million barrels a day for the past four weeks, up about 2.1% compared with the same period a year ago.

Before the EIA report, benchmark West Texas Intermediate (WTI) crude for February delivery traded up about 0.3% at around $61.77 a barrel, and it moved down to around $61.68 after the report’s release before returning to $91.78 minutes later. WTI settled at $61.63 on Wednesday and opened at $61.93 Thursday morning. The 52-week range on February futures is $43.76 to $62.21, and the high was posted this morning.

Since mid-December WTI crude oil has added about $5 a barrel and settled on Wednesday at its highest price in three years at $61.63, and it posted a 52-week high at $62.21 early this morning. How long can the party go on?

The higher pricing is almost entirely due to the withdrawal of about 1.8 million barrels a day in global crude oil supplies resulting from the OPEC-initiated production cuts. The cartel expects that the crude market to balance this summer and run at a small deficit in the second half of 2018.

How likely is that? Reuters oil analyst John Kemp comments:

History suggests that OPEC will gamble on tightening the market too much, with prices overshooting on the upside, rather than risk not tightening it enough and prices fall back. …

OPEC has not declared a price target for 2018, though some senior officials from member countries have briefed they want to see a Brent price floor of $60, which implies an annual average well above this. …

In practice, if OPEC comes anywhere near achieving its objective of draining stocks down to the five-year average level, prices will likely end up well above $70, which will probably be welcomed by most OPEC members.

But the more prices increase, especially with Brent prices near $70, and WTI prices above $60, the more likely U.S. shale drilling and production rates will accelerate, which will tend to frustrate the objective of lowering stocks.

Week over week, U.S. crude oil exports rose by 265,000 barrels a day last week and U.S. production increased by 28,000 barrels a day to 9.78 million. Exports averaged 1.475 million barrels a day last week and have a cumulative daily average for the year of 979,000 barrels a day, a 102% increase over the year-ago export total.

Distillate inventories increased by a whopping 8.9 million barrels last week and remain in the middle of the average range for this time of year. Distillate product supplied averaged about 4.1 million barrels a day for the past four weeks, up by 5.8% compared with the same period last year. Distillate production averaged 5.6 million barrels a day last week, up about 100,000 barrels a day compared to the prior week’s production.

For the past week, crude imports averaged about 8 million barrels a day, down by 27,000 barrels a day compared with the previous week. Refineries were running at 96.7% of capacity, with daily input averaging 17.6 million barrels a day, about 210,000 barrels a day more than the previous week’s average. Exports of refined products fell by 1.12 million barrels a day last week to 4.47 million.

According to AAA, the current national average pump price per gallon of regular gasoline is $2.486, up 2.6 cents from $2.462 a week ago and down one cent per gallon compared with the month-ago price. Last year at this time, a gallon of regular gasoline cost $2.359 on average in the United States.Here is a look at how share prices for two blue-chip stocks and two exchange traded funds reacted to this latest report.

Exxon Mobil Corp. (NYSE: XOM) traded up less than  0.1%, at $86.76 in a 52-week range of $76.05 to $90.30. Over the past 12 months, Exxon stock has traded down about 3.5%.

Chevron Corp. (NYSE: CVX) traded down about 0.1%, at $127.27 in a 52-week range of $102.55 to $128.94. As of last night’s close, Chevron shares are trading up about 8% over the past year.

The United States Oil ETF (NYSEARCA: USO) traded up about 0.2%, at $12.37 in a 52-week range of $8.65 to $12.38. The high was posted today.

The VanEck Vectors Oil Services ETF (NYSEAMERICAN: OIH) traded up about 0.9%, at $27.45 in a 52-week range of $21.70 to $35.20.

Dow Industrials Cross 25000 for First Time
S&P 500 also reaches new landmark, logging greatest bull run in postwar eraBy 

 The Dow Jones Industrial Average jumped past 25000 for the first time Thursday, the index’s fastest run to a fresh 1,000-point milestone in history.

The S&P 500’s long-running rally also reached a new landmark Thursday, becoming the greatest bull market in the postwar era. The broad index has more than quadrupled since the bull market began in March 2009, surpassing the tech-fueled rally of the 1990s, according to the research firm Leuthold Group, which excluded dividends from its calculations. The Dow has risen 283% over that same period, according to the WSJ Market Data Group.

Thursday’s moves marked the latest feats for a rally that has repeatedly wrong-footed skeptics and sent stock indexes around the world to multiyear highs. The Dow industrials hit five thousand-point milestones last year, the most such records in its 120 years.Dow Hits 25000: Here's Why It Matters
The Dow Jones Industrial Average crossed 25000, marking the latest big-number milestone for the index. So why does it matter? WSJ Markets Reporter Akane Otani explains. Photo: Getty Images.



Dow Crosses 25000 for First Time
Individual Investors Sit It Out
Fewer Companies: Good or Bad?
Heard: Dow Has What Investors Want
Streetwise: Economic Cycle Is Broken
Here’s Why Dow 25000 Matters
Dow Record in Record Time
Boeing Behind Dow’s Rise
Dow Ghost Gets Last Laugh
Long-Time Stock Bear Gives In
GE Is No Help in Recent Surge

Faster economic growth around the globe and improving sentiment from consumers and businesses have helped power this rally in recent weeks. Economic data in the first days of the new year continued to suggest steady expansion in the U.S., China and Europe.

“The turn of the calendar year doesn’t change the dynamics of economic growth and earnings growth,” said Kate Warne, investment strategist at retail brokerage Edward Jones. “We shouldn’t be surprised that markets continue to move higher because fundamentals continue to be positive and investor optimism is actually improving rather than investors becoming more cautious.”

The Dow industrials, which heavily weights industrial giants such as Boeing and Caterpillar, gained 152.45 points, or 0.6%, to 25075.13. It took the Dow industrials 23 trading days to reach 25000 from 24000, ahead of the 24-day spans that carried the index to 11000 in 1999 and 21000 in March.

The S&P 500 climbed 10.93 points, or 0.4%, to 2723.99, while the Nasdaq Composite added 12.38 points, or 0.2%, to 7077.91. Each major index closed at fresh records.

Shares of financial firms led markets higher Thursday as a strong private jobs report raised investors’ expectations for further interest-rate increases.

Businesses across the country added 250,000 workers in December, according to payroll processor Automatic Data Processing Inc. and forecasting firm Moody’s Analytics, topping economists’ expectations. The U.S. Bureau of Labor Statistics will release its monthly jobs report on Friday.

Goldman Sachs Group gained $3.54, or 1.4%, to $256.83, contributing about 24 points to the Dow’s gain. American Express Co. added 1.65, or 1.7%, to 100.85, while JPMorgan Chase & Co. rose 1.54, or 1.4%, to 109.04.

“Financials had been out of favor for some time, but they’ve been benefiting from this [tax] stimulus,” said Jeff Zipper, a portfolio manager and managing director at U.S. Bank’s Private Client Reserve.

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