Daily Sources 9/10

1. Sean Brodrick, at Money and Markets, published a piece entitled "The Agriculture Bomb" today. I think the analysis is solid, for the most part. (I have no thoughts on the stock advice.)

2. Thomas Frank at the Wall Street Journal has an interesting piece, not all that related to geopolitics, which points out that the GOP's strategy of alienating the coasts altogether might prove just a tad self-defeating. Most interesting factoid: Sen. Obama has a 100% rating from the Farmer's Union, Sen. McCan a 0% rating.

3. OPEC announced the outcome of its meeting in Vienna today, noting that the market was "oversupplied," but establishing an overall production quota of 28.8 mb/d, an increase over last quota (set in November) of 27.3 mb/d, though members promised to "strictly comply" with them. (This is viewed as a de facto cut of 500 kb/d, coming from Saudi Arabia, but we will have to see whether Riyadh actually cuts.) Oil Ministers which came to "observe" were from Russia, the Sudan, and Egypt. Resolutions passed will be published October 10, should the member countries' legislative wings ratify them. Evidently, Saudi Arabia has already promised not to abide by the new quota, as per a story by Jad Mouawad at the New York Times.

4. Felix Onuah at Reuters reports that the Nigerian President, Umaru Yar'Adua, reorganized many of the government ministries today, including the Energy Ministry.

5. The EIA's Short-Term Energy Outlook was released yesterday. It predicts that global consumption / demand will grow by 970 kb/d in the second half of 2008 and 920 kb/d in 2009, on a year over year basis. Demand growth was slow in the first half of 2008, with a 930 kb/d decline in US consumption. "Moderation in China’s demand, however, is expected to be temporary, as sustained economic growth is expected to support oil consumption growth." The EIA's Week in Petroleum was released today and it reports a 5.9 mb drop in crude stocks, a 6.5 mb decline in gasoline stocks, and a 1.2 mb decline in distillate inventories. However, stock levels were at about the average of the last five years, except for in the case of gasoline. This edition also has a useful and interesting graphic of the prices paid for gasoline and diesel in countries across the world.



The Oil & Gas Journal reports that the IEA (International Energy Agency) published its Oil Market Report today and revised downwards their projections of worldwide demand growth. However, it predicts that non-OECD demand will grow more than previously predicted, mostly on the strength of Chinese and Indian demand growth.

6. Andres R. Martinez and Jens Erik Gould at Bloomberg report that the Mexican government will raise the price of gasoline sold by Pemex on a weekly basis until they are at the market rate.

7. Assocham published a study which posits that tight money policy in India has, in conjunction with high energy prices and subsidization, caused energy companies to defer expansion plans, as per domain-b.

8. Curbs on Oil Speculators a Diversion by Andrea Corcoran and Tom Corcoran. My view.

9. Enlightening, if not surprising, piece by Greg Farrell at the Financial Times about how Ohio Republican Mike Oxley had submitted legislation in 2005 to reform the GSE's which was put down by the White House, which argued that the only solution to the troubles of Fannie and Freddie could be their complete privatization.

10. Leon Aron has another piece of alarmist analysis in the Wall Street Journal today, which, given the storm of it, is likely self-fulfilling. Provide Russia with the rationale--NATO expansion--to involve itself further in Ukrainian affairs, encourage an energy environment of high prices--via two wars and belligerent diplomacy--enabling Russian adventurism, demonize Moscow thus discouraging efforts to recognize mutual interests and thus why non-confrontational jaw jaw is better than war war, and then cry, see, I told you so!

Daily Sources 9/4

1. Jihadica has a very interesting piece on a report from the Ingush Mujahidin which details successful tactics in their conflict with the Russians. (The Republic of Ingushetia is just between Chechnya and North Ossetia in the Caucasus.)



The report talks of the centralization of the mujahidin efforts in the Caucasus, and, apparently, the Dagestani and Chechen Fronts both released reports recently alluding to the same phenomena. (Dagestan is to the east of Chechnya, on the littoral of the Caspian Sea, just north of Azerbaijan.)



This, in Jihadica's view, means that there might be some credibility in the FSB's (formerly the KGB) warning of imminent al-Qaeda attacks. This underscores my view that Russian interests are much closer to the West's than the press--and several Senators--would have it. Russia has little interest in establishing a precedent for "self-determination" in the region, but also has no interest in establishing a precedent of allowing Russia-identifying groups be attacked, with impunity, by other self-identifying groups, such as Georgians. Russians constitute an ethnic minority in many of the countries in the former Soviet Union and that is a potent political issue that Medvedev and Putin cannot allow to get out of control. For a sense of the ethnolinguistic complexities of the region we're talking about, see the following map:



2. Steven Lee Myers and Alan Cowell at the New York Times write that Cheney has reaffirmed US support for Georgian membership in NATO.

3. David Jolly at the New York Times writes that BP has reached a compromise regarding the leadership of TNK-BP in Russia, where the current CEO would be replaced by the end of the year with a Russian-speaking candidate with extensive Russian business experience. The parties also tentatively agreed to placing 20% of TNK-BP shares in an IPO, pending Moscow's agreement.

4. Alex Lawler at Reuters reports that PFC Energy thinks that pressure is building within OPEC for production quota reduction. (Evidently meeting on Tuesday, September 9, not the 6th, as I've previously noted ... my bad.)

5. Turns out that Brazil has not officially turned down OPEC invite, Brazil's National Energy Policy Council has the final word on the membership, as per BBC.

6. Joshua Partlow and Juan Forero at the Washington Post have an interesting piece on the United States closing a military base in Ecuador. Ecuador recently rejoined OPEC and its current President is a close ally of Chavez's. A war nearly broke out between Colombia and Ecuador--with Venezuela mobilizing its troops for good measure--not so long ago.

7. Bursa Malaysia is set to launch a crude palm oil futures contract denominated in US dollars this Friday, as per Reuters. (Interesting given all the talk of moving away from dollars in the oil and financial industries.)

8. Yves Smith at Naked Capitalism writes that the CFTC appears to believe that oil traders have been under-reporting inventory and tanker information. This is very interesting because the folks that the "anti-speculation" legislation currently under consideration in Congress goes after are the non-commercial players, i.e., the people who do not have to report these numbers. Those players would be the commercial players, those not considered "speculators." Pretty clear this evil speculation rhetoric was nonsense from the beginning, but just so you know.

9. Co-Chairman of the Pakistan People's Party and Pakistani Presidential Candidate Asif Ali Zardari has an op-ed in the Washington Post today. He writes that it is "essential" that the judiciary be reconstituted, but apparently he is against the reinstatement of Supreme Court Chief Justice Chaudry, the rallying point for the lawyers revolution in that country.

10. In a nice bit of irony I missed until just now, the first company to request a release from the Strategic Petroleum Reserve due to Gustav as per Christian Schmollinger and Tina Seeley at Bloomberg was Citgo, or PdVSA (Petroleum de Venezuela S.A.). In a moment the DOE must have relished, the USG immediately agreed to help via a release from the SPR. The next day, Citgo lets the DOE know it has met its requirements via other means.