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Pre-Market Primer: US to Become a Net Oil Exporter by 2030


Europe's finance ministers capitulate over Greek aid, and investors are holding their breath over the fiscal cliff negotiations in Congress.

MINYANVILLE ORIGINAL Global share prices climbed today, though doubts over the continuance of Greece's bailout and the US Congress' ability to compromise and avoid over $600 billion in spending cuts and tax increases still weigh on investor confidence.

Before the opening bell, futures contracts on the Dow Jones Industrial Average (INDEXDJX:.DJI) rose 0.27% to 12,798.00. S&P 500 (INDEXSP:.INX) futures gained 0.37% to 1,380.80, and Nasdaq (INDEXNASDAQ:.IXIC) futures increased by 0.51% to 2,593.75.

Since American voters elected a still-divided government last Tuesday, nearly $1 trillion of wealth has been erased from global equities. The main reason for the sell-off is uncertainty over the US fiscal cliff. While many institutional investors point out that the US economy is improving and no sane politician would willfully throw America into a recession when it is just getting on its feet, the possibility of a drawn-out fight from now until New Year's Day is a very real one.

President Barack Obama will be hosting Democratic and Republican leaders in Congress at the White House this week to negotiate a compromise.

The Greek government is still waiting for a green light on its hard-won 2013 budget. After packing in still more austerity measures and labor market reforms, the troika of the International Monetary Fund, European Central Bank, and European Commission are still not in agreement over how much should ultimately be disbursed to Greece, and which investors will take the hit. Athens has a 5 billion euro bill to pay on Friday that it won't be able to meet without that crucial tranche of aid. Eurozone finance ministers will be meeting today to discuss whether to disburse the 31.5 billion euros of aid this week.

Taiwan's HTC Corp (TPE:2498) will pay licensing fees to Apple (NASDAQ:AAPL) as part of a patent lawsuit settlement. HTC's financial position has deteriorated over the past two years, as rival Samsung (KRX:005930) came out with more popular Android phones. Paying licensing fees to Apple for its patents that other original equipment manufacturers have argued are dubious could drastically hurt the company's competitiveness. For Apple, this indicates a greater willingness to compromise over patents, as opposed to Steve Jobs' vow to wage "thermonuclear war" on the Google (NASDAQ:GOOG) Android ecosystem.

Japan reported a quarterly drop of 0.9% in GDP, the steepest decline in the Japanese economy since the March 2011 earthquake and tsunami. The third-largest economy dropped by 3.5% on an annualized basis in the three months ending in March, though compared to last year's it was up 0.2%. The biggest hit came from weakness in exports, which shaved off 0.7% of growth. The country's Tertiary Index, which measures activity in 13 key industries, showed 1% yearly growth in September, but slumping personal consumption and the trade spat with China that began in September could lead to another GDP dip in this quarter, officially throwing Japan into recession.

The International Energy Agency said in its World Energy Outlook 2012 report that the US could overtake Saudi Arabia as the world's top oil producer by 2017 and become a net oil exporter by 2030.

"Energy developments in the United States are profound and their effect will be felt well beyond North America – and the energy sector. The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity – with less expensive gas and electricity prices giving industry a competitive edge – and steadily changing the role of North America in global energy trade," the report said.

Renewable energy sources are expected to become the world's second-largest energy source by 2015, and will probably overtake coal by 2035, but the rapid growth of these sources "hinges critically on continued subsidies" which amounted to $88 billion in 2011.

In observance of Veterans' Day, the US bond markets are closed. There are no economic indicators due for release today.

Twitter: @vincent_trivett
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