Natural Gas

The American Petroleum Institute said last week the U.S. oil and natural gas sector was an engine driving job growth. Eight percent of the U.S. economy is supported by the energy sector, the industry's lobbying group said, up from the 7.7 percent recorded the last time the API examined the issue. The employment assessment came as the Energy Department said oil and gas production continued to make gains across the board. With the right energy policies in place, API said the economy could grow even more. But with oil and gas production already at record levels, the narrative over the jobs prospects may be failing on its own accord.

• Botulism toxin? There's an apology for that - Fonterra CEO apologizes, sees China dairy curbs lifted within days (Reuters)
• Patent troll-In-Chief strikes again: Veto of Apple Ruling Likely to Upend Big Patent Battles (WSJ)
• Because scapegoating means justice FTW - SEC Gets ‘Shot in the Arm’ With Victory in Tourre Case (BBG)
• Insider-Trading Probe Caught in a Washington Knot (WSJ)
• Miners return to hedging as gold  (FT)
• Toyota’s $37 Billion Cash Pile Means Turning Point for Abenomics (BBG)
• Inside the battle at Germany's Siemens (Reuters)
• ‘One million’ UK workers on zero hours contracts (FT)
• Wag the dog, part 1984: Iran Seen Trying New Path to a Bomb (WSJ)
• Tokyo Cheap to Hong Kong Luring Asian Bargain Hunters (BBG)

In order to maximize their long-term profit, the Saudi`s will be watching the shale-boom in the US for an optimal oil price. This will prove a challenge for an oil dependent nation as the natural gas price implies a far lower oil price than the political elite is comfortable with.

Greed; corporate arrogance; lobbying influence; excessive leverage; accounting tricks to hide debt; lack of transparency; off balance sheet obligations; mark to market accounting; short-term focus on profit to drive compensation; failure of corporate governance; as well as auditors, analysts, rating agencies and regulators who were either lax, ignorant or complicit. This laundry list of causes has often been used to describe what went wrong in the credit crunch crisis of 2008-2010. Actually these terms were equally used to describe what went wrong with Enron more than twenty years ago. Both crises resulted in what at the time was the biggest bankruptcy in U.S. history — Enron in December 2001 and Lehman Brothers in September 2008. Naturally, this leads to the question that despite all the righteous indignation in the wake of Enron's failure did we really learn or change anything?

The past few weeks have seen the tech and business media abuzz about a not-so-little warehouse in Tennessee. That's because this distribution center, opening its doors with a burst of fanfare and even a few visits from nearby politicians, isn't a jumping-off point for Macy's or Target. Instead, the warehouse is the latest in a series of new locations being opened by retail technology giant Amazon.com. The jobs this new mega-warehouse is purported to create: 5,000. However, as we discuss below, for every job Amazon "creates," four other jobs go away at a company like TJX.

The conventional wisdom of the moment is that a weakening global economy will push the cost of commodities such as oil down as demand stagnates. This makes perfect sense in terms of physical supply and demand, but this ignores the consequences of financial demand and capital flows. The total financial wealth sloshing around the world is approximately $160 trillion. If some relatively modest percentage of this money enters the commodity sector (and more specifically, oil) as a low-risk opportunity, this flow would drive the price of oil higher on its own, regardless of end-user demand and deflationary forces. If we grasp that financial demand is equivalent to end-user demand, we understand why oil could climb to $125/barrel or even higher despite a physical surplus.

• Headlines only idiots, Schrodinger and Goebbels could love:
  • China Manufacturing Gauge Shows Unexpected Strength (WSJ)
  • China's factory activity shrank for a third straight month in July to its lowest level in nearly a year as new orders fell (Reuters)
• For nuns and analysts alike, bank commodity earnings are a mystery (Reuters)
• US spying comes under fresh attack (FT)
• Summers Backed Yellen for Fed Before Rivals Now Prove More Alike (BBG)
• Good Luck Leaving Your Wireless Phone Plan (WSJ)
• Spain's Rajoy says he was wrong to trust treasurer in party funding scandal (Reuters)
• Shell's Profit Falls on Shale Write-Down (WSJ)
• Why Rand Paul and Chris Christie went to war  (Politico)
• Sony Returns to Profit Aided by TV Business (WSJ)

The world supply of crude oil isn’t going to run out any time soon, and we will be producing oil for decades to come. However, what we won’t be doing is producing crude oil – petroleum – at the present rate of around 30 billion barrels per year. For a global civilization that is based almost entirely on a plentiful supply of cheap, crude oil, this is going to present some considerable challenges.

• "Ooops": Barclays reveals £12.8bn balance sheet hole (FT), Barclays Bows to Pressure With Share Sale (WSJ)
• Bank of Italy Inspecting Top Lenders' Books (WSJ)
• Obama to propose 'grand bargain' on corporate tax rate, infrastructure (Reuters)
• China injects funds into money markets, quelling fears (FT)
• Berlusconi faces verdict that could endanger Italian government (Reuters)
• Shale Threatens Saudi Economy, Warns Prince Alwaleed (WSJ)
• Qatar Finds Revolution Abroad Not as Easy as Stock Picks (BBG)
• Cities Begin Hiring Again (WSJ) - not to mention filing for bankruptcy
• Big Question Hangs Over Small-Caps (WSJ)
• China Politburo Pledges to Press On With Restructuring Economy (BBG)
• Bank Revenues Surge on Trading Over What Fed Will Do (BBG)

• More Doctors Steer Clear of Medicare (WSJ)
• Syrian Looters in Bulldozers Seek Treasure Amid Chaos (BBG)
• Siemens CEO Peter Löscher Is Set to Leave His Post After Series of Earnings Misses (WSJ)
• Silver Vault for 200 Tons Starts in Singapore as Wealthy Buy (BBG)
• Omincom and Publicis merger shows that advertising is now firmly in the business of Big Data: collecting and selling the personal information of millions of consumers (NYT)
• Apple supplier accused of labour violations (FT)
• 'BarCap was the Wild Wild West – that’s what we called it’ (Telegraph)
• P&G chief seizes opportunity in era of three-day stubble (FT)
• Federal Reserve 'Doves' Beat 'Hawks' in Economic Prognosticating (WSJ) - LOL: Fed "hawks"

• The Department of Justice has opened an initial probe into the metals warehousing industry (WSJ)
• Obama Says Budget Debate a Battle for Middle Class Future (BBG)
• Death Toll From Spanish Train Crash Hits 77 (WSJ)
• ‘Fabulous Fab’ takes to witness stand (FT)
• Banks Said to Weigh Suspending Dealings With SAC as Charges Loom (BBG) - what about Anthony Scaramucci?
• How the Muslim Brotherhood lost Egypt (Reuters)
• German Business Confidence Rises for a Third Month (BBG)
• Fraternities Lobby for Tax Break Without Hazing Penalties (BBG)
• China charges Bo Xilai with corruption, paves way for trial (Reuters)
• Airbus Pushes Higher-Density A380 to Counter Luxury Image (BBG)

At precisely 4 am Eastern two opposite things happened: the German IFO Business Climate for July printed at a better than expected 106.2 vs 105.9 in June and higher than the 106.1 consensus: news which would have been EURUSD positive. And yet the EUR tumbled. Why? Because at the same time the ECB provided an update to the chart that "keeps Mario Draghi up at night" as we reminded readers yesterday - the ECB's all important credit creation update in the form of the M3, which not only missed expectations (of +3%) but declined from 2.9% to 2.3%. But more importantly, ECB lending to private sector shrank for the 14th consecutive month in June, and slid to a new record low 1.6% in June, down from a 1.1% in May.

Plunging Chinese manufacturing and an 11 month low PMI got you down? Don't worry: there's a Europe for that, which overnight reported that manufacturing and service PMI in Germany and, don't laugh, France soared far above expectations (German Mfg and Services PMIs of 50.3 and 52.5, up from 48.6 and 50.4, and above expectations of 49.2 and 50.8; French Mfg and Services PMIs of 48.3 and 49.8, up from 47.2 and 48.4 and an 11 and 17 month high, respectively, blowing away expectations of 47.6 and 48.8). The result was a composite Eurozone Manufacturing PMI of 50.1, above 50 for the first time since February of 2012, up from 48.8 and at a 24 month high - reporting the largest monthly increase in output sunce June 2011, as well as a composite Services PMI of 49.6, up from 48.3, and an 18 month high. In other words, European Composite PMI is expanding (above 50) for the first time since January 2012.

A BP official who led the company before the 2010 incident in the Gulf of Mexico marked his return to the region in a $3.75 billion deal with Houston-based Apache. Apache seemingly said goodbye to the Gulf of Mexico in the deal, opting instead to focus its efforts onshore. Former BP Chief Executive John Browne helped nab 1.9 million net acres in the agreement with Apache last week. Apache's "good run" in the Gulf of Mexico may suggest assets onshore may hold more long-term value for explorers as new drilling technologies have contributed to exponential production gains for onshore oil and natural gas in the United States.

Oil and gas exploration is getting bigger, deeper, faster and more efficient, with new technology chipping away at “peak oil” concerns. While hydraulic fracturing has been the most visible revolutionary advancement, other high-tech developments are keeping the ball rolling - from the next generation of ultra-deepwater drillships, subsea oil and gas infrastructure and multi-well-pad drilling to M2M networking, floating LNG facilities, new dimensions in seismic imagery and supercomputing for analog exploration.