Natural Gas

• LA port workers to return Wednesday (AP)
• Iran says extracts data from U.S. spy drone (Reuters)
• Obama to stress need to raise debt limit "without drama" (Reuters)
• Big Lots Chief Probed by SEC (WSJ)
• NATO missiles to be sent to Turkey, Syria clashes rage (Reuters)
• GOP Deficit Plan Irks Conservatives (WSJ)
• Japan Can End Deflation in Months, Shirakawa Professor Says (BBG) ... almost as good as Bernanke ending inflation in 15 minutes.
• Osborne Prepares to Breach Fiscal Rules Amid U.K. Growth Slump (BBG)
• Global Banking Under Siege as Regulators Guard National Interest (BBG)
• Freeport plans return to energy (FT)
• Serbian NATO envoy jumps to death at Brussels airport (Reuters)
• Tide Turns After a Flood of Chinese Listings (WSJ)
• Australian economy loses steam (FT)
• Euro Crisis Feeds Corruption as Greece Slides in Rankings (BBG)

Yesterday we noted that India was preparing to send its Navy into the South China Sea - defending its mineral rights from China's increasingly vociferous presence. The Philippines also expressed concern. Today, it's Vietnam's turn as Reuters reports the nation is condemning China's "serious violation of sovereignty" as Chinese boats sabotaged Vietnamese State oil and gas company - PetroVietnam's operations (by severing a seismic cable). The actions stem from China's 'belief' that two Vietnamese-owned archipelagos (Spratly and Paracel Islands) are theirs. While China (who oppose unilateral oil and gas development in disputed waters) argued somewhat comically that "Chinese fishing boats were operating normally," the Vietnamese saw it as "blatant violation of Vietnamese waters," and are deploying marine police and a border force to stop foreign vessels. As one analyst noted, "It's going to lead to friction."

A snapshot of (quite amusing) "New Normal" dealmaking in the insolvent continent.

Bill Gross' latest monthly missive begins with some political commentary on the latest presidential election, pointing out the obvious: after the euphoria comes the hangover, completely irrelevant of what happens to the Fiscal Cliff: 'whoever succeeds President Obama, the next four years will likely face structural economic headwinds that will frustrate the American public. “Happy days are here again” was the refrain of FDR in the Depression, but the theme song from 2012 and beyond may more closely resemble Strawberry Fields Forever, as Lennon laments “It’s getting hard to be someone but it all works out.” Why is it so hard to be someone these days, to pay for college, get a good-paying job and retire comfortably?" And while political campaigns were just that, the truth is that nobody has the trump card to a perfect quadrangle of problems which will mire the US economy for years to come, among which i) debt/deleveraging; ii) globalization, iii) technology, and iv) demographics. Gross' outlook is thus hardly as optimistic as all those sellside reports we have been drowned by in the past 2 weeks, hoping to stir the animal spirits one more time: 'We may need at least a decade for the healing.... it is getting harder to maintain the economic growth that investors have become accustomed to. The New Normal, like Strawberry Fields will “take you down” and lower your expectation of future asset returns. It may not last “forever” but it will be with us for a long, long time." Sad: looks like it won't be different this time after all...

Although its interests in the continent are broadly similar, India’s engagement with Africa differs significantly from China. Will it prove sustainable? Close ties between India and Africa are not new. Trade has flourished between East Africa and India’s west coast for centuries. New Delhi’s interest in Africa waned in the 1990s, but rapid economic growth and soaring energy requirements, however, forced India at the turn of the new millennium to rethink its neglect of Africa. The domination of oil and natural resources in India’s imports from Africa and of manufactured goods in its exports to the continent has drawn criticism that India is indulging in a “neo-colonial grab” for Africa’s resources. "This is an uninformed view. Africa of today is not the same as during colonial times. When countries exploit the resources of Africa today, the terms are set by the African nations and not by outsiders. The deals are mutually beneficial." India hopes that its capacity building, people-centric approach and efforts to build a sustainable partnership with Africa will keep such allegations at bay.

As if global geopolitics were not tempestuous enough, it seems China's increased military presence near Indian state-run explorer Oil and Natural Gas Corp's (ONGC) Nam Con Son basin operations near Vietnam are sparking India's navy into action. India's Navy Chief Joshi according to Reuters, said it was prepared to act, if necessary, to protect its maritime and economic interests in the region. He added that "When the requirement is there, for example, in situations where our country's interests are involved, for example ONGC... we will be required to go there and we are prepared for that." While the Straits of Hormuz seem to get most of the world's attention, the growing trouble in the South China Sea is troubling since it "is one of the most important international waterways and freedom of navigation there is an issue of utmost concern to India," because a large portion of India's trade is through the South China Sea. Noting that the modernization of China's Navy is "truly impressive", Joshi concluded:  "...are we preparing for it? Are we having exercises of that nature? The short answer is yes!" The Chinese are not making any friends as The Phillippines also condemned China's actions.

There was a time when flings (insert personal contextual experience) used to be simple, impromptu, largely trivial things seeking instant gratification. That was until Shell's Floating Liquid Natural Gas facility, or FLiNG, came along: currently being built in the South Korean shipyards (largely unoccupied in the past several years after a surge in dry bulk container ship construction left the industry with a massive inventory glut and little demand for its precision engineering), this behemoth of a ship, measuring nearly half a kilometer in length, and displacing 600,000 tonnes of water, will be the world's largest offshore floating facility when deployed 200 km off the north-west coast of Australia in 2017 to process the recently discovered Prelude and Concerto gas fields. It will also likely revolutionize the field of Liquified Natural Gas extraction.

Right now the world produces more Oil than it consumes each day, and it has for the past 16 months, this trend will only get worse in 2013.

Following some well-timed 'suggestions' in Natural Gas and Apple this year, the new bond guru has some rather more concerning views about the future of America. Reflecting on a dismal outlook progressing due to the fact that "Retirees take resources from a society, and workers produce resources", Gundlach has cut his exposure to US equities (apart from gold-miners and NatGas producers) noting their expensive valuation and low potential for growth. In a forthcoming Bloomberg Markets interview, the DoubleLine CEO warns we are about to enter the ominous third phase of the current debacle (Phase 1: a 27-year buildup of corporate, personal and sovereign debt. That lasted until 2008, when Phase 2 started, unfettered lending finally toppled banks and pushed the global economy into a recession, spurring governments and central banks to spend trillions of dollars to stimulate growth) as deeply indebted countries and companies, which Gundlach doesn’t name, will default sometime after 2013. "I don’t believe you’re going to get some sort of an early warning," Gundlach warns "You should be moving now."

Currency wars are set to intensify as the US Senate is considering new sanctions against Iran that would prevent Iran getting paid for its natural resource exports in gold bullion. The new sanctions aimed at reducing global trade with Iran in the energy, shipping and precious metals sectors may soon be considered by the U.S. Senate as part of an annual defense policy bill, senators and aides said on Tuesday, according to Reuters. The sanctions would end "Turkey's game of gold for natural gas," Reuters reported a senior Senate aide as saying, referring to reports that Turkey has been paying for natural gas with gold due to sanctions rules. The legislation "would bring economic sanctions on Iran near de facto trade embargo levels with the hope of speeding up the date by which Iran's economy will collapse," the aide said. Last week Turkish Deputy Prime Minister Ali Babacan has revealed a critical detail about a widely discussed Turkey-Iran gold trade boom, disclosing that the Islamic republic was exporting gas to Turkey in exchange for payment in gold bullion. It is also reported that Iranians are buying Turkish gold with the Turkish Lira, which is deposited into their bank accounts in exchange for Turkey’s natural gas purchases, the deputy prime minister said at midnight Nov. 22 during a parliamentary session. Iran cannot transfer monetary payments to Iran in U.S. dollars due to U.S sanctions against the country’s alleged nuclear weapons program. Iran has been forced to shun the international financial system and the petrodollar as means of payment and turn to the international gold market to ensure it gets paid for its natural resources in order to prevent absolute economic collapse.

Consumer Confidence up to a level not seen since February 2008—a level that caused people to tear their hair out at the time

CME Group declared a force majeure at one of its New York precious metals depositories yesterday, run by bullion dealer and major coin dealer Manfra, Tordella and Brooks (MTB), due to “operational limitations” posed by Hurricane Sandy. MTB has “operational limitations” following Hurricane Sandy and can’t load gold bullion, platinum bullion or palladium bullion, CME Group Inc., the parent of the Comex and New York Mercantile Exchange, said today in a statement. MTB must provide holders with metal at Brinks Inc. in New York to meet current outstanding warrants in relevant delivery periods with compensation for costs, Chicago-based CME said. The CME said that MTB will not be able to deliver metal as the lower Manhattan company deals with "operational limitations" almost a month after the arrival of Hurricane Sandy. MTB is one of five depositories licensed to deliver gold against CME's benchmark 100-troy ounce gold contract, held 29,276 troy ounces of gold and 33,000 troy ounces of palladium as of Nov. 23, according to data from CME subsidiary Comex. In a notice to customers on Monday, CME declared force majeure for the facility, a contract clause that frees parties from liability due to an event outside of their control.

Not surprisingly, in the weeks since the historical hurricane made landfall, new attention is being paid to the mounting costs that coastal world megacities may face. Intriguingly, however, this new conversation about climate, energy policy, and America’s reliance on fossil fuels comes after a five-year period in which the U.S. has dramatically lowered its consumption of oil and seen an equally dramatic upturn in the growth of renewable energy. The combination of declining oil use and a greater reliance on the global powergrid is going to shape energy and climate policy. Especially at a time when the concerns of climate change – or, rather, rising seas and the greenhouse dangers of fossil fuel dependency – are being increasingly raised. This will make for a rather muddled and complex array of diverging policy initiatives. Moreover, as new oil supplies emerge from domestic American sources, the dream of resurrecting this cheap oil era will no doubt come back around several more times. But none of these new resource plays will change the trajectory of global oil supply much, nor will they lower the price of oil. So far, new oil supply mostly offsets declines elsewhere – but at substantially higher marginal cost. This should now be clear.

Remarkably prescient given our discsussion yesterday, it seems the leading Canadian junior oil companies are doing whatever they can to create value for their shareholders. Three of the top junior oil companies in Canada are turning away from high growth and into dividend plays this morning. These are all well-respected, leading junior management teams. What we’ve seen in the markets lately is the generalist institutional money—especially in the US but also Canada—leave the junior oil sector. Growth and good management is not getting rewarded. So maybe income and good management will. Is this a sustainable business model now? Other dividend payers like Petrobakken, Pennwest, Enerplus, etc. are down in share price this year. Time will tell.

An initial lower open in major European cash bourses has been pared despite concern over Greek and a lack of any progress in agreement between Eurozone officials and the IMF. Source comments early on in European trade helped provide renewed optimism that a plan for Greece is edging closer after it was reported that the German Chancellor Merkel told lawmakers Greece's financing hole through 2016 can be filled with combination of lower rates and increased EFSF. The FTSE is under-performing its European peers at the mid-point of trade today as several large cap stocks go ex-dividend, although strength has been seen following the latest Bank of England minutes which showed a less dovish than expected 8-1 vote split to hold fire on QE between the MPC meetings. Following the release of the minutes, a now reduced expectation for asset buys at the December meeting saw upside in GBP/USD in a move away from the 1.5900 handle, and Gilt under pressure, although short-sterling shrugged off the comment that the central bank is unlikely to cut bank rate in foreseeable future.