Daily Sources 3/30

1. Jason Clenfield at Bloomberg reports that Japanese industrial production fell by 9.4% in February from January, as per the Trade Ministry. "Inventories fell an unprecedented 4.2%."

"There are signs a recovery may be stirring in the US, Japan’s biggest market. US orders for durable goods rose in February for the first time in seven months. Inventories of long-lasting durable goods fell for a second month and new home sales increased for the first time since July.

In Japan, the drop in inventories adds to evidence that the worst of the manufacturing slump may be over. Companies said they would increase production 2.9% this month and 3.1% in April, today’s survey showed."

2. Volkhard Windfuhr and Bernhard Zand at Der Spiegel recently conducted an interview with Sheik Hamad bin Khalifa Al-Thani, the Emir of Qatar in which he addressed a wide range of issues, and indicated that as a member of OPEC Qatar's position was that oil should be at $40/b to help support a global recovery. Key excerpts:

"SPIEGEL: How do you believe oil prices will develop now?

Hamad: I think the oil price should continue (to stay) in the $40 range for at least one or two more years.

SPIEGEL: Why so modest?

Hamad: Because this way we can help the world out of this crisis. If the world economy recovers, it will be good for us, too. Automatically, the price of oil will go up again. I don't see why OPEC countries should continue to cut production just to keep the price of oil high. This will not affect the industrial countries alone, it will also hit poor countries in Africa, Asia and Latin America. Who will look after them?

SPIEGEL: That's not the kind of argument you often hear when talking to oil producers.

Hamad: Yes, but I believe this battle is a battle for the whole world. Everybody should be helping each other for the next two years."

Interestingly, the Emir appears to believe that Europe will not be as badly affected by the economic crisis as the US. The Emir also addressed the issue of the emerging natural gas cartel:

"SPIEGEL: Europe has staked its future on natural gas, but we are concerned about supplies. Can Qatar step in to fill the breach if Russia fails to deliver?

Hamad: We are selling gas to Italy, Spain, Belgium and, starting within the next few weeks, to Britain. I know that the Germans prefer to have their own gas supply, but I think our gas could come to Germany through another European country. However, this depends on the quantities we have on hand and the price.

SPIEGEL: Europeans are also worried about the creation of a so-called Gas-OPEC. Is there another cartel in the making that will be able to set prices at will?

Hamad: With OPEC they have a cartel. Why don't we have this gas cartel as well? And why don't we make a sort of agreement between consumers and producers? I wouldn't mind such a gas cartel, but it will take time because some countries today sell for high prices and others sell for low prices. It will be hard for those selling high to bring their prices down. So we will need time."

The Emir also stated unequivocally that Qatar would not stand with the US against Iran. But, similarly, he thinks it would be hard for the Arab countries of the Gulf to stand with Iran against the US. He further states that though he welcomes the Obama Administration's new timbre in its approach to the region, that the other conflicts in the region also need to be addressed. He indicates Qatar's continued support for the Arab Peace Plan of 2002, with qualifications:

"Hamad: I think Israel will not accept the return of the Palestinian refugees. But on the issue of dividing the city of Jerusalem (and turning over East Jerusalem to the Palestinians), I think they should accept it."

Which seems reasonably rational to me. He also addressed the issue of the ICC's arrest warrant for Sudan President al-Bashir:

"SPIEGEL: The International Criminal Court has issued an arrest warrant against Sudan's president, Omar al-Bashir. Why are you opposed to this?

Hamad: If anything happened to Omar al-Bashir and Sudan ended up in chaos, the whole of Africa would also sink into chaos. Sudan is a vast land with a lot of borders. Al-Qaida would be happy to see Sudan become like Iraq.

SPIEGEL: Isn't it time for the Arab world to finally do something about the Darfur problem?

Hamad: We have been mediating in Sudan for a long time, particularly because the groups in Darfur do not want the Arab League to get involved. My hope is that we do not see interference from some other Arab countries. We are confident. We need to give the parties time--we have to let them shout and issue their grievances, and finally we need to get the process of negotiations going and discuss the future of their country.

SPIEGEL: Al-Bashir is now in Doha to attend the Arab summit.

Hamad: I sent my prime minister to invite him."

The Emir is extremely frank for the duration of the interview--a must read.

3. Juan Cole at Informed Comment helpfully provided the USG Open Source Center's translation of the March 22nd speech of the Supreme Leader [more accurately Leader of the Revolution or LOTR] Ayatollah Ali Khamenei in response to the overture made directly by President Obama. (The USG Open Source Center paradoxically does not just simply publish their efforts.) This section of the speech begins with a long recitation of historical offenses of the US--real and imagined. (For example, Khamenei indicates that the US green-lighted Saddam Hussein's initial attack on Iran, something I believe is not the case.) The LOTR is not respectful, ironically enough--even if predictably enough--in the way he addresses the President's speech. For example, the LOTR says

"They have the slogan of change. Where is the change? What has changed? Clarify this to us."

Which on one level is fair enough, but also just off kilter, given that the change promised was to the American people, not the Islamic Republic of Iran. He also has a rather different take on the world's reception of the new POTUS than I, insofar as the LOTR remarks that the US is "hated in the world."

"Today, you are hated in the world. You should know this, if you do not already. Nations set fire to your flag. Muslim nations across the world chant 'Death to America.'"

The last bit being true of few nations outside of Iran itself. Just prior to this the LOTR chooses to question whether or not the POTUS is indeed in charge in the US, which seems to me a rather pointed insult.

"I would like to say that I do not know who makes decisions for the United States, the President, the Congress, elements behind the scenes?

He then manages to come quite close to calling the President a liar. (Remember, the US's official position in the IAEA is that Tehran is lying about its nuclear program.)

"You may say that you want to change policies, but not your aims, that you will change tactics. This is not change. This is deceit."

He also brings up the question of translation in a somewhat insulting way--and I might even be inclined to concede this point, so to speak, but Juan Cole, who is clearly a partisan of reconciliation seems to think this is a reasonable translation, so I imagine it is a fair representation.

"This is my advice to US officials, the President, and others. Listen well to these words, and have them translated for you. Of course, do not give it to the Zionists to translate for you. Consult healthy people, and seek their opinions."

(In fact, the government did release an official translation of bits and pieces of the speech in a summary in English here.) That noted, there are a few elements of the speech which could be regarded as an opening.

"But I would like to say that we have logic. Since the beginning, the Iranian nation moved with logic. Regarding our vital issues, we are not sentimental. We do not make decisions based on emotion. We make decisions through calculation."

And he concludes the section of the speech dealing with the Obama Nowruz greeting with:

"If you go on with the slogan of discussion and pressure, saying that you will negotiate with Iran, and at the same time impose pressure, threats, and changes, then our nation will not like such words. We do not have any experience with the new US President and Government. We shall see and judge. You change, and we shall change as well. If you do not change, our people became more and more experienced, stronger, and more patient in the past 30 years."

This could be seen as an opening, though I would note that the change in tone was not reciprocated--and this is from a culture acutely sensitive to matters of politesse. I would also note that the key section which some argue represents an offering was not included in the official translation of key elements of the speech offered on the LOTR's website.

That said, some argue the move is a clear opening. Juan Cole's response is here, and he wrote

"The US corporate media mysteriously interpreted Khamenei's words as a rebuff to Obama, but in light of the phrase I just quoted, I can't understand how they reached that conclusion."

Given the points I mention above, I find it incredibly difficult to understand how it is that Dr. Cole "cannot understand how they reached that conclusion" and how it could even be characterized as "mysterious." In any case, Cole chose to frame the speech as a "grumpy old man's" response to the Obama overture in which he was making his first offer in what he expects to be a long period of haggling toward a grand bargain.

Farideh Farhi--a very well-respected Iran expert--also believes the speech was conciliatory, though she disagrees with the "grumpy old man" characterization and does not think that everything is on the table. Her take is:

"Clearly from [the LOTR's] view, engagement in talks must be accompanied with some concrete steps that show Iran that the United States is interested in a process and give and take and not a process based on 'either deception or intimidation.' Deception because the objective remains the same while the softer language is a mere tactical change. Intimidation because talks are combined with further squeeze of Iran."

It is worth reading the speech for yourself. Meanwhile, on Saturday Ernesto Londoño at the Washington Post reported that the Mujaheddin-e Khalq, or MEK, will be removed from their camp near the Iranian border and that the leaders will be separated from followers who will be "de-brainwashed" or "re-educated" depending on your point of view. The question of US support for the organization is one of the major sticking points addressed by the LOTR's speech.

4. Stuart Williams at AFP reports that the World Bank forecasts that Russian GDP will shrink by 4.5% in 2009.

"The forecast is considerably more pessimistic than that of the Russian government, which is predicting a contraction of 2.2 percent in GDP in 2009."

5. Nadia Rodova and Stuart Elliott at Platts report that Surgutneftegaz informed the press today that it had purchased a 21.2% stake in Hungarian oil and gas company MOL from Austria's OMV.

"This price represents a 93% premium to Friday's closing price, a 27% premium to the 12-month average price, and a 19% discount to the 12-month peak price of Hungarian Forint 23,700, Renaissance Capital said in a research note."

6. Edward Hugh at Fistful of Euros reported Sunday that the Bank of Spain intervened to take over Caja Castilla La Mancha, whose losses are estimated to be as much as €3 billion. Spanish financial shares fell sharply today in reaction to the news.

7. Reuters reports that the Bank of England today released data showing that the number of new mortgages approved in the UK in February grew at the fastest rate seen since May 2008.

"Mortgage lending rose by £1.507 billion, almost double analysts' forecasts for an £800 million rise, and up from just over £1 billion in January."

8. Chris Baldwin and David Sheppard at Reuters report that Europe's oil refining sector is shutting down gasoline units, given the collapse in demand from the US. Topper refineries--simple refineries without additional sophisticated processing units which increase production of certain products like gasoline or diesel--account for about 1 mb/d of Europe's 16 mb/d throughput capacity are the most likely to be decommissioned. Traditionally European surplus gasoline production has often been shipped to the US, serving as an upper boundary, so to speak, on the price of gasoline.

"'Europe's oil demand may never reach its peak again,' Leo Drollas, chief economist at the Center of Global Energy Studies (CGES), said."

9. Eric Watkins at the Oil & Gas Journal reports that Habib Kagimu, chairman of Tamoil Uganda Ltd., has suggested that Kenya's Mombasa-to-Eldoret oil pipeline could eventually be extended to Uganda's Albertine rift basin, where several big crude discoveries have been made recently.







10. Shailagh Murray and Karen DeYoung at the Washington Post reports that at a Capitol Hill news conference slated for tomorrow a bill will be introduced to lift the travel ban to Cuba. If the measure were to pass it would be an extremely significant reversal of long standing US-Cuba policy.

11. Liz Capo McCormick at Bloomberg reports that the Fed purchased $2.499 billion of US treasuries in its third direct purchase of US debt. The number was much less than the market was anticipating given the size of the Fed's program as announced.

12. An extremely interesting article discussing whether Goldman Sachs deliberately manipulated the price of oil upwards in June-July 2008 in a short squeeze, by Christopher Helman and Liz Moyer at Forbes.

Daily Sources 12/23

1. Wall Street Journal Europe yesterday published an opinion piece by the finance minister of Germany, Peer Steinbrück, in which he outlined Berlin's view of how to approach the crisis. This is probably in response to the heavy criticism he has recently received in the opinion pages of the New York Times, by Paul Krugman, and the Financial Times, by Martin Wolf and Wolfgang Münchau, that Germany's stimulus package is in effect a "beggar thy neighbor" policy. Much of his position can be restated, in my view, as that the way forward is to implement the five goals iterated in the global financial summit of November 15th. They are:

"- Strengthening Transparency and Accountability: Financial-market participants must provide comprehensive information, including for complex financial products. There must be no more excessive risk-taking.

- Enhancing Sound Regulation: In the future, the G-20 will ensure that all financial markets, products and participants are regulated or subject to oversight (including rating agencies).

- Promoting the Integrity of Financial Markets: This includes better protecting investors, avoiding conflicts of interest and taking measures against market manipulation and fraud.

- Reinforcing International Cooperation: The cooperation among national regulators for crisis prevention, crisis management and crisis resolution must be better coordinated.

- Reforming International Financial Institutions: : The IMF should, in cooperation with the FSF, enhance its early warning capabilities and play a key role in coping with crises. Developing countries and emerging economies should be given a greater say in the IMF and World Bank, while the FSF should be enlarged to include leading emerging market economies."

Steinbrück goes on to say that he thinks that the G-20 has gone a long way toward implementing these reforms, which seems fairly counterfactual to me. That said, the three top points are in my view variations on one theme: that we need to have a credible way of investigating what it is we are being asked to invest in. As long as no one trusts the books of the various financial institutions, no one is going to be all that anxious to loan to them or invest in them. This might especially be true of banking institutions which have a very good idea of the kind of financial instruments which could be in their competitors' books and how they might be hidden. Still, it's not clear it would be in their interest to provide a light onto how best to determine the risk posed to other institutions, because that would serve to shine a light on their own risk-taking. But, whether or not you think strong, medium, weak, or even non-Keynesian methods should be applied to the financial crisis, it seems that more needs to be done about the primary issue of transparent book keeping. In any case, Steinbruck states that the stimulus programs being considered by other capitals around the world are not suitable to Germany's situation:

"It is more than likely that such large-scale stimulus programs -- and tax cuts as well -- would not have any effects in real time. It is unclear whether general tax cuts can significantly encourage consumption during a recession, when many consumers are worried about losing their jobs. The history of the savings rate in Germany points to the opposite. Targeted measures are clearly preferable to scattershot ones."

And, he concludes with:

"Governments can reduce the likelihood of the emergence of financial-market crises and mitigate significant declines in economic activity. No more, no less. Anybody who claims otherwise is deliberately pulling the wool over people's eyes and thus undermines confidence in the political process. That is the last thing we need now."

Well worth reading in full.

2. Platts reports that a study conducted by a committee of the Gas Exporting Countries Forum found that it would be impractical to abandon pricing mechanisms for natural gas contracts which links natural gas prices to the price of oil.

"'Due to inter-fuel competition, it is impossible to eliminate the link to the oil price [in gas markets], where gas consumers are able to switch to oil products,' the committee said."

As a larger percentage of natural gas is available for spot purchases due to liquefaction capabilities, the market will become more global. However, as it stands, the high capital costs, fixed production and transportation options, and consequent long-term contracting will continue to fragment the market. In that vein of thought, Platts reports that Algerian oil minister Chakib Khelil said today there were no plans to turn GECF into a cartel operating along the lines of OPEC.

"Asked whether the organization would be reshaped along the lines of oil exporters group OPEC, Khelil replied: 'Really, it is different. The OPEC of oil looks at today. For gas, today is already there. Gas is sold for the next 10-15 years.'"

(Contracts for natural gas usually are very long term contracts lasting for 10 to 20 years and linked by specific bespoke formula to the price of oil--usually as expressed by the front month price of light sweet crude on either NYMEX or ICE.)

"'We are not going to spend too much time looking at today, we will be spending a lot of time looking at tomorrow, looking how we can cooperate among us, how markets can evolve, how legislation in consuming countries will evolve, regulations,' [Khelil] said."

That said, Lucian Kim at Bloomberg reports that the Venezuelan Oil Minister, Rafael Ramirez, told the GECF meeting in Moscow that the forum should organize along the same principles as OPEC. The organization also announced that its headquarters will be based in Doha, Qatar, the least politically divisive position of the potential choices mooted of Russia, Iran, or Algeria. Platts also reported that Russian Energy Minister Sergei Shmatko at the meeting urged close cooperation by energy producers with an end to market stability, saying Russia is ready for "very close cooperation."Moscow is still waiting on data on OPEC member compliance with the cut announced December 17.

3. Uchenna Izundu at the Oil & Gas Journal reports that Gazprom Chairman Viktor Zubkov has warned that the dispute over natural gas price with Ukraine may force Gazprom to shut off supply, which would affect European supply as much of their natural gas is shipped via pipelines through the Ukraine. "Ukraine wants to pay $100/Mcm for Russian gas in 2009, while Gazprom is demanding international prices of $250/Mcm to $300/Mcm." In short, Kiev wants a subsidized price of natural gas to a government which is fairly openly hostile to Moscow--including efforts to join NATO which have even been proposed in such a way as to appear hostile to Moscow--as opposed to the market price for that gas.



4. Dorota Bartyzel and Ewa Krukowska at Bloomberg report that the Polish central bank--the Narodowy Bank Polski--cut its benchmark interest rate by 0.75% (75 basis points) to 5%. This was a sharper cut than any of the analysts surveyed by Bloomberg expected.

5. Charles Lee at Platts reports that the Korean National Oil Corp. (KNOC) has recently completed the expansion of oil storage facilities at Yeosu which can now hold 49.75 million barrels of oil in both underground and ground tanks, up from 30.75 million barrels when the project began 11 years ago. 49.75 million barrels represents about 23 days of South Korean oil consumption, about 36% of the country's current storage capacity of 138 million barrels. Yeosu is a coastal city in the southernmost province of South Jeolla.



South Korea plans to have storage facilities for 146 million barrels of oil by the end of 2009 and to add an additional 6 million barrels of storage to Yeosu by 2011, bringing the total to 152 million barrels. South Korea's energy strategy revolves around importing vastly more than the domestic requirement and exporting the refined surplus. It also stores foreign crudes for states looking to store oil so they might capture profit opportunities from price spikes or other market irregularities. Over 35 million barrels are stored by KNOC for Algeria, Norway and China. The terms of the storage provides that South Korea has first access to the oil should there be a supply crisis.

6. Jay Lefkowitz argues that now is the time to take the regime in North Korea to task for its human rights abuses. And just now South Korea is no longer pursuing quite so enthusiastically its sunshine policy. Still, I think that Lefkowitz, who was a Bush envoy to the country, might consider that the only real time when the US possessed to requisite international political will to address the problem of North Korea was just subsequent to 9/11. If at all.

7. Rama Lakshmi of the Washington Post reports that Pakistan scrambled jet fighters yesterday over several of its cities Monday as tensions slowly boil between the two countries. Indian Foreign Minister Pranab Mukherjee told a meeting of over 120 foreign envoys to New Delhi that "We have so far acted with utmost restraint, [but we] will take all measures necessary as we deem fit to deal with the situation." He also suggested that India might strike at camps inside Pakistan unilaterally, if Islamabad is not seen to be making progress against extremist elements inside its borders. On Monday the Chairman of the US Joint Chiefs of Staff, Admiral Michael Mullen, arrived in Islamabad to meet with Pakistan's army chief, Gen. Ashfaq Kiyani, and the head of its Inter-Services Intelligence agency, Lt. Gen. Ahmed Shuja Pasha. Worth reading in full.

8. Sam Dagher and Graham Bowley at the New York Times report that the Iraqi Parliament accepted the resignation of its speaker, Mahmoud al-Mashhadani, and then immediately passed a resolution allowing the troops of those troops not covered by the Status of Forces Agreement to stay in Iraq past the new year.

9. Keith Bradsher at the New York Times reports that Indonesia is planning an economic stimulus plan and summarizes an interview he conducted with the governor of Indonesia’s central bank, Mr. Boediono. Worth reading in full.

10. Reuters reports that Iranian state radio has announced that Tehran has sent a warship, of unspecified class, to the Gulf of Aden in order to contribute to the fight against piracy off Somalia. (h/t Galrahn at Information Dissemination.)

11. Alan Cowell at the New York Times reports that the death of long-time President Lansana Conté of Guinea has sparked a coup attempt by the military of that country.

12. Bob Willis and Shobhana Chandra at Bloomberg report that sales of new and existing single-family houses fell by 7.6% in November. Median sales prices fell by 13%, which is the sharpest decline seen since records were first kept in 1968.

13. Aaron Clark at Bloomberg reports that the EIA's Market Assessment of Upcoming Planned Refinery Outages was released today showing that Petroleum Administrative Defense District 1--the East Coast--is expected to take much more refining capacity offline than the historical norm. Historically on average about 30 kb/d of fluid catalytic cracker refining capacity is taken offline in February for maintenance and repairs. The EIA report forecasts that 164 kb/d of FCC capacity will be taken offline. (To simplify, fluid catalytic crackers units are sophisticated distillation units at refineries designed, generally speaking, to maximize the output of gasoline versus other products like diesel.) PADD 1 is one of the larger consuming regions of the country (which was divvied up into 5 petroleum administration defense districts in World War II as the government managed production as part of the war effort.) Last year on average PADD 1 ran 1.387 kb/d of crude through its refineries in February. That said, for the country as a whole, crude distillation unit outages (or outages for all refineries) are expected to be about 28 kb/d more than is historical, not an especially sharp divergence from the norm. However, the EIA also expects distillate production--by distillate the EIA means diesel for the most part--to be much higher over the next few months than it has been over the course of the last three years. Heating oil--which is almost identical to Diesel No 2--margins over crude are quite attractive if you consider NYMEX futures as opposed to gasoline, where the crack spread is clearly negative. This would seem, in isolation, to presage continued low crude prices through March.

Daily Sources 10/24

1. Maher Chmaytelli and Margot Habiby at Bloomberg reports that OPEC decided to cut production quotas by 1.5 mb/d in their emergency meeting today.Per OPEC's press release individual country quotas will be reduced by the following amounts:

Algeria: 71 kb/d
Angola: 99 kb/d
Ecuador: 27 kb/d
I. R. Iran: 199 kb/d
Kuwait: 132 kb/d
Libya: 89 kb/d
Nigeria: 113 kb/d
Qatar: 43 kb/d
Saudi Arabia: 466 kb/d
U.A.E.: 134 kb/d
Venezuela: 129 kb/d

Saudi Arabia rejected the suggestion put forth by Venezuela that OPEC re-establish a target price band. Reaction from industrialized governments was negative. UK Energy Minister Mike O'Brien called the decision "disappointing," as per David Sheppard at Reuters. White House Spokesman Tony Fratto called it "anti-market," as per the AFP.

Also at Bloomberg, Ayesha Daya reported that Saudi OPEC Governor told journalists after today's meeting that:

"'We don't know what's going to happen in December,' [al-Naimi] said, referring to OPEC's next scheduled meeting in Oran, Algeria, on Dec. 17.

'This is a moving target and as it stands now we see no reason to take another cut,' al-Naimi said.

Asked if the group would be ready to increase output if prices surged again in the future, al Naimi said, 'The answer is yes.'

'Our interest is not where the price is, as much as a stable price, a stable inventory and stable supply and demand,' he told reporters.

Al-Naimi said that OPEC was not to blame for the financial crisis.

'We are not responsible for high prices, they were driven by people who were buying long futures and speculating on the market,' he said. 'Now that they are out of the market prices have come down to the levels they are today.'"

2. Uchenna Izundu at Platts reports that the "Gas Troika" of Russia, Iran and Qatar will hold their first meeting in Doha on October 27--next Monday. The three believe that they will find means to better cooperate in discussions at the Gas Exporting Countries Forum (GECF) and thus push the organization into a more OPEC-like mold. My sense is that so far this is mostly a public relations effort designed to support oil prices.

3. In another interesting post today, Brad Setser at Follow the Money pointed out that the renmimbi has risen along with the dollar versus world currencies.

The net effect, I suspect, is that the US will still run a significant — though smaller — deficit. And once the deleveraging process is over and the US deficit cannot be financed by the sale of US foreign assets, China’s government will continue to finance a large share of the US deficit.

The dollar block will be in balance: The oil exporters that peg to the dollar will be in rough current account balance, and the US deficit will roughly match China’s surplus.

That at least is my best current guess.

Worth reading in its entirety. The appreciation of the yuan should make oil consumption growth in China less painful, however. In a related story, Platts reports that China might cut guideline prices for petroleum products, given the fall in crude costs. Refiners reportedly stopped hemorrhaging money this month.

Also, Liz Mak at Asian Investor reports that Taiwan has decided to institute a 50% ceiling on the percentage of offshore investment limit Taiwanese insurance companies can hold in Fannie, Freddie, Ginnie and Mortgage Backed Securities. The companies will be required to limit their investment in any one of the agency's (Fannie Mae, Freddie Mac, or Ginnie Mae) debt to 25% of their total offshore investment limit. It is my sense that even if a move like this makes tremendous fiscal sense that it must have been approved at the highest levels, and that it is a message to Beijing and Washington. Taipei is probably anticipating a future fall in the dollar, and perhaps signaling openness to closer ties to Beijing. Perhaps Taipei has calculated that the US ability to project a defense umbrella that far out has become critically undermined by the fiscal crisis--and subject to the Achilles Heel of PBoC's dollar holdings. (h/t Yves Smith at naked capitalism)

4. The US Department of Transportation released new data showing that vehicle miles traveled in August fell by 15 billion from a year ago, a reduction of 5.6%. This is a considerable acceleration from the 9 .6 billion vehicle mile drop seen in July--a 3.6% drop in miles driven from a year earlier. Cumulative road travel in the US has dropped by 3.3% for 2008. Andrea Rothman at Bloomberg reports that the International Air Transport Association released data today suggesting that "global air traffic, or the number of passengers multiplied by the distance flown, declined 2.9 percent from a year earlier, with freight traffic dropping 7.7 percent." This is the steepest fall in global air traffic since the SARS outbreak in 2003. The Baltic Dry Index continues to fall. All of these are indicators of demand destruction for oil ... and the range of its products ... but also of drastic reduction in trade, which as several others have pointed out, will exacerbate the current financial crisis.



5. Alexander Kwiatkowski at Bloomberg reports that options to sell oil at $50/b rose 143% (to $1.50) today.

6. Christopher Swann and Tasneem Brogger at Bloomberg report that the IMF is considering a plan to offer member countries credit of as much as five times the amount of their quota contributions.

"South Korea's IMF quota is $4.4 billion, meaning it could get as much as $21.8 billion under the potential program. Mexico might qualify for $23.5 billion, with $22.6 billion for Brazil and $10 billion for Poland."

Other countries reported to be looking to IMF for support include Russia, Turkey, Hungary, Belarus, Ukraine and Pakistan, as per Terence Roth and Christopher Emsden at Real Time Economics.

7. Mary Beth Sheridan at the Washington Post reports that the US has handed over security responsibility to the Iraqi Government in the "triangle of death" south of Baghdad. Juan Cole reports that the Sadr Movement has begun a protest of the draft security agreement between the al-Maliki government and the Bush Administration.

Al-Hayat also chronicles the failure of the visit to Iran of Iraqi Kurdish leader Massoud Barzani, who was seeking to reassure his Iranian colleagues about the status of forces agreement. President Mahmoud Ahmadinejad, Speaker of the House Ali Larijani, and Expediency Council head Akbar Hashemi-Rafsanjani all denounced the proposed agreement as a humiliation for Iraq and an infringement against it sovereignty. Larijani compared it to the agreement between the Shah of Iran and the US over troops and bases in Iran, which restricted GIs from being tried in Iranian courts.

8. Warren P. Strobel at McClatchy Newspapers reports that anonymous sources within the Bush Administration say that it will announce an agreement to establish an interests section in Iran in the middle of November, after the election. The Fars News Agency reports that the US Treasury Wednesday imposed additional sanctions on the Export Development Bank of Iran (EDBI), essentially seizing any assets they might hold in US jurisdiction. The same article remarks on the electricity shortage in the country just now:

Iran currently suffers from an electricity shortage that has forced the country into adopting a rationing program by scheduling power outages - of up to two hours a day - across both urban and rural areas.

9. Qaiser Khan Afridi at Pakistan's The News reports that people in major cities throughout the country have taken to publicly burning their power bills in protest over the brown and black outs plaguing the country.

10. Kurt Achin at Voice of America reports that UN officials believe that the situation in North Korea has deteriorated so much that a substantial portion of the population is facing starvation in the near future.

11. Maya Jackson Randall at the Wall Street Journal reports that the National Association of Realtors released statistics which suggest that "existing-homes" sales--or home resales--rose to a rate of 5.18 million per annum, a 5.5% increase on August's reading.

12. Ye Xie and Agnes Lovasz at Bloomberg report that the Yen has risen to a 13 year high versus the dollar as the carry trade unwinds. That is, investors sold high-yield financial products worldwide and paid back the low cost Yen-based loans they used to finance the original purchases.

13. Asia News reports that the pogrom targeting Christians in Iraq continues.

14. Editors at Wall Street Journal Asia argue that the land rights reforms China has announced it will introduce to combat the economic slow down do not go far enough and that full-fledged property rights need to be introduced.

15. Polina Devitt at Reuters reports that Mechtel, the coal mining company which Vladimir Putin attacked a month or so ago leading to a steep drop in its share price and then to shares in Russian companies generally, has announced a decision to reintroduce the plan to sell preferred shares on the market, the plan which led to Putin's criticism in the first place. Well, I guess Moscow can snap em up cheap now.