Daily Sources 10/15

1. Aoife White at the Associated Press reports that the G8 announced today it will hold a global summit to cobble together a common plan of action to prevent future financial crises from taking place. The meeting may take place as early as Novemeber and perhaps in New York City. President Sarkozy has said that all members of the European Union back the "radical restructuring" of the IMF and World Bank. He also calls for a "new capitalism." UK Prime Minister Gordon Brown said the meeting would require the vision of the Bretton Woods Conference. While I have to applaud the recognition that the interests of so many are interconnected and interdependent, the language is just a tad breathless, no? To me it kind of sounds like politicians scared for their jobs more than serious action, though it is probably the case that something along the lines of the conference should be done. Can a financial consensus that results in an effective policy tool come out of a meeting that inclusive, though? We shall see. What can a global summit do that, say, the G20 couldn't more effectively do?

2. Sharon Otterman, David Jolly and Bettina Wassener at the New York Times report that the DOW fell 733 points, or 7.8%, today after Monday's 936 point gain.

"After a host of European data Tuesday suggesting that the region was headed into a recession, Japan announced Wednesday that its current-account surplus shrank 52.5 percent from a year earlier, more than economists had expected. More alarming, exports during the month edged up only 0.9 percent, while imports soared 20.2 percent from a year earlier, mostly because of higher oil prices. Japan has suffered from weak domestic demand for a decade and sales overseas have been a major support to the country’s economic growth."

The US Department of Commerce announced today that retail and food services sales fell 1.2% in September month over month (+/- 0.5%) and 1% year over year (+/- 0.7%).

3. OPEC reduced its forecast for 2008 global oil demand by 330 kb/d to 86.5 mb/d. It reduced its forecast of 2009 global oil demand by 450 kb/d to 87.21 mb/d. The Monthly Oil Market Report estimated that the decline in US demand reduced OECD demand by 1.8% to 48.3 mb/d. On October 10, the Paris-based IEA forecast 2008 demand at 86.5 mb/d and 2009 demand at 87.2 mb/d. Nearly identical. The Washington DC-based EIA forecast on October 7 for 2008 was 86.1 mb/d and 86.9 mb/d in 2009 ... showing a narrowing differential in terms of expectations.

Platts reports that Nigeria's oil production is beginning to return to 2006 levels of 2.5 mb/d, reaching 2.3 mb/d this month. Production is expected to reach 2.4 mb/d by the end of the year. The Nigerian oil minister last week told reporters that oil production capacity in that country is still on track to reach 4 mb/d by 2010. The Nigerian National Assembly is set to consider reform legislation designed by a presidential panel over the course of a year which would break up the Nigerian National Petroleum Corporation into five new institutions.

Grant Smith at Bloomberg reports that PFC Energy predicts that OPEC will cut their production by 1 mb/d in the November 18 emergency meeting. Before the September 9 meeting, PFC announced that OPEC would decide on a 500 kb/d cut in production. The September 9th meeting resulted in the decision to more closely hone to the production quotas as they are, which would, if followed, have the effect of reducing production by 500 kb/d or so. So far surveys indicate that OPEC has cut production by about 300 kb/d or so, with Saudi Arabia leading the way with reductions estimated between 100 - 170 kb/d.

RIA Novosti reported today that Russian crude production declined 0.6% year over year for the period January - September 2008 to 365 million tonnes (2.7 billion barrels or 9.85 mb/d.)

Hugo Chavez followed Algerian President Abdelaziz Bouteflika suit today, calling for "austerity" in the 2009 budget, as per Dow Jones. The financing terms that are part of Chavez's South and Latin American and Caribbean strategy may see some cut backs.

However, from the perspective of OPEC, the light is already beginning to peek out from behind the end of the tunnel. Roland Jones at MSNBC reports that SUV sales maintained their 4.4% share of the market in September from August. Eventually lower prices will boost demand, one way or another.

4. Islamabad's The Nation reports that part of the reason hydroelectric power is facing shortages in Pakistan just now is that India reduced the flow of the Chenab River in order to inaugurate the Baglihar Dam in Jammu-Kashmir. Indian Prime Minister Singh announced its commencement on October 10 as part of the effort by New Delhi to integrate the province into greater India. Nerve wracking.