Daily Sources 8/12

CHINA BUYING YEN

Tim Duy at Tim Duy's Fed Watch reports that the renminbi, dollar and yen are on a collision course. China is buying yen at a time where the yen is hitting record highs. If Japan responds by buying dollars, then China has managed to get Japan to help maintain the value of their dollar holdings as well as their ability to sell them. Well worth reading in full.

CHINESE STRATEGISTS SEE EXERCISES IN YELLOW SEA AS PART OF EFFORT TO ENCIRCLE CHINA WITH AN ASIAN NATO

Dai Xu at China.org.cn argues that the US is trying to build an Asian NATO to encircle China.


JAPANESE CONSIDER OPTIONS AFTER ATTACK ON TANKER

Takeo Kumagai and Pradeep Rajan at Platts report that the Japanese are considering how to increase security at the Straits of Hormuz after the bomb attack on the M Star VLCC. One option being considered is to only send tankers through the strait during the day time. However restricting passage to daytime hours would add to the congestion in traffic through the strait. Japan is stuck with importing oil through the Strait of Hormuz--80% of their oil supplies pass through it.

GREEK ECONOMY SHRINKS BY 1.5% IN THE SECOND QUARTER

The BBC reports that the Greek economy shrank by 1.5% in the second quarter from the first. The economy shrank by 3.5% from this time last year.

"That adds to 0.8% decline in GDP recorded for the first three months of the year, suggesting that the decline in the economy is speeding up."

INDUSTRIAL PRODUCTION IN INDIA RISES 7.1%

Kartik Goyal and Unni Krishnan at Bloomberg report that industrial production in India increased 7.1% in June from a year earlier. 7.1% is the slowest rate in 13 months and some see it as evidence that the economies in Asia are cooling.

TURKEY USED CHEMICAL WEAPONS AGAINST PKK

Daniel Steinvorth and Yassin Musharbash at Der Spiegel report that photos have been taken of dead PKK members which seem to demonstrate that Turkey used chemical weapons to kill them. German politicians are demanding an explanation from Ankara.

TOP IRAQI MILITARY COMMANDER SAYS US EXIT IS COMING TOO SOON

BBC reports that the top Iraqi military commander has indicated that the US plan to remove all its troops by 2011 is too soon. He said that the army will only be ready to take control of the situation in 2020.

IRAQ WILLING TO ACCOMMODATE IRANIAN PIPELINE TO SYRIA

Deutsche Presse-Agentur reports that the Iraqi oil ministry has published a press release stating that the government has no objection to a gas pipeline from Iran crossing Iraqi territory to Syria.

"'Iraq does not mind facilitating the extension of the Iranian gas pipeline through its territory to Syria and the Mediterranean Sea,' Iraqi oil minister Hussein al-Sharistani said in the statement"

CHINA AND IRAN AGREE TO BROADER OIL AND GAS COOPERATION; LUKOIL RESUMES GASOLINE EXPORTS TO IRAN; IRAN CANCELS TWO LNG PROJECTS

The Tehran Times reports that Iran's oil minister and China's vice premier met and agreed to broaden their cooperation in the oil and gas sector. Meanwhile, Reuters reports that Lukoil has resumed exports of gasoline to Iran.

"In July, Russia’s energy minister Sergei Shmatko said Russian companies would be ready to supply fuel to Iran if there were commercial interest and attractive terms."

However, the sanctions appear to be having an effect on Iran's natural gas plans, canceling two LNG projects Spencer Swartz reports in the Wall Street Journal. LNG technology is mostly held by Western firms.

EUROPEAN COMMISSION LAUNCHES INVESTIGATION INTO US BIODIESEL DUMPING

Isis Almeida at Platts reports that the European Commission is investigating whether US biodiesel exporters are avoiding anti-dumping duties by sending the product through a third country like Canada or exporting B19--19% biodiesel, 81% diesel--which is not subject to the anti-dumping tax.

US biodiesel receives a subsidy of $1/gal ($300/mt) if blended with diesel, which the European Union says represents unfair competition.

This led the European Commission to slap provisional anti-subsidy and antidumping duties on imports of US biodiesel in March 2009. The measure was extended for five years last July, with definitive antidumping duties on US biodiesel of Eur200-400/mt ($274-$548/mt).

CONGRESSMEN SEEK TO KILL $100 MILLION IN AID TO LEBANESE ARMY ON HEZBOLLAH FEARS

Daniel W. Drezner at Foreign Policy reports that members of the US Congress are seeking to stop $100 million in aid to the Lebanese Army.

"Now, I understand the Congressional impulse to do something here -- I really do. What I don't understand is how Congress thinks that withholding aid from the Lebanese military will weaken Hezbollah. Congress seems to think that anything that aids the Lebanese Armed Forces (LAF) will concomitantly aid Hezbollah. The latter group, however, has independent sources of financial, political and military support. It's better to think of the LAF as a competing power base than as a conduit to Hezbollah. Anything that weakens national institutions in Lebanon empowers the groups that can survive in a more anarchical environment -- and gee, whaddaya know, that would include Hezbollah."

INITIAL JOBLESS CLAIMS UP

Courtney Schlisserman and Tim Homan at Bloomberg report that initial jobless claims for the week ended August 7th rose by 2,000 to 484,000, the highest level since February.

"The number of people receiving unemployment benefits dropped, while those getting supplemental benefits surged by 1.34 million reflecting the government’s extension of eligibility."

HUD TO OFFER $1 BILLION IN INTEREST FREE LOANS TO FOLKS FACING FORECLOSURE

Lorraine Woellert and Kathleen M. Howley at Bloomberg report that HUD is to offer $1 billion in interest-free loans to help out folks who have lost income and are facing foreclosure on their homes.

"The Department of Housing and Urban Development plans to make loans of as much as $50,000 for borrowers “in hard hit local areas” to make mortgage, tax and insurance payments for as long as two years, according to a statement released today. The Treasury Department will also provide as much as $2 billion in aid under an existing program for 17 states and the District of Columbia, according to the statement."

Daily Sources 8/11

CHINESE ECONOMY SLOWING SOME FROM BREAKNECK SPEEDS

Keith Bradsher at the New York Times reports that the Chinese economy is slowing:

"The gradual slowing in China is evident in the factories that have turned the country into the manufacturing center of the world. Industrial output rose 13.4 percent last month compared with the same month last year.

By comparison, industrial output had been up 13.7 percent in June from a year earlier, and was up 16.5 percent as recently as May.

Much the same pattern was evident in fixed asset investment, which was up 24.9 percent last month compared with a year earlier. It had been ahead by 25.5 percent in June, and 25.9 percent in May.

Retail sales rose 17.9 percent in July compared with the same month last year, as Chinese consumers with rising wages continued to flock to stores for ever more spending. But sales had grown 18.3 percent in June compared with a year earlier, and had been up 18.7 percent in May."

What we would do for such growth!

RUSSIA DEPLOYS S-300 MISSILE SYSTEM IN ABKHAZIA

Dmitry Solovyov at Reuters reports that Russia has deployed a S-300 missile system in Abkhazia.

"The S-300, codenamed 'Favorite' in Russia, is a mobile, long-range air defense system that can detect, track and destroy ballistic missiles, cruise missiles and both high- and low-flying aircraft."

RUSSIAN ECONOMY GROWS BY 5.2% IN THE SECOND QUARTER FROM A YEAR EARLIER

Maria Levitov at Bloomberg reports that the Russian Federal Statistics Service said today in an email that its second quarter economic growth came in at 5.2% over the second quarter of last year.

IEA REPORTS THAT IRANIAN IMPORTS OF GASOLINE HURT BY SANCTIONS; TURKEY INDICATES IT WILL NOT COMPLY WITH GASOLINE SANCTIONS ON IRAN

Carola Hoyos at the Financial Times reports that the most recent IEA report says that the tougher sanctions on Iran have halved Tehran's gasoline imports.

"As a result Iran has been forced to pay a 25 per cent premium to market prices for its petrol deliveries as many companies shy away from supplying the country, the International Energy Agency reported on Wednesday."

Meanwhile, Orhan Coskun at Reuters reports that the Turkish Energy Minister told the wire service that Ankara will support sales of gasoline to Iran.

"Tupras, Turkey's sole refiner and gasoline exporter which is owned by Koc Holding, declined to say whether the company had sold anything to Iran. The refiner buys 33 percent of its crude from the Islamic Republic, however."

Also, if I remember correctly, Turkey imports some natural gas from Iran.

UN APPEALING FOR $459 MILLION FOR FLOOD RELIEF IN PAKISTAN

The Associated Press reports that the UN is appealing for $459 million in order to help flood victims in Pakistan.

"The UN Office for the Coordination of Humanitarian Affairs said 'the worst monsoon-related floods in living memory' has affected more than 14 million people and at least six or seven million require immediate humanitarian assistance including food, clean water, shelter and medical care."

AN OVERVIEW OF THE INDIAN ENERGY SECTOR

Utpal Bhaskar and Elizabeth Roche at livemint.com gives a pretty good overview of the energy situation facing India.

VENEZUELA AND COLOMBIA REINSTATE DIPLOMATIC RELATIONS; COLOMBIA INDICATES THAT IT IS OPEN TO TALKS WITH FARC REBELS

The BBC reports that Colombia and Venezuela reinstated diplomatic relations yesterday. Relations were cut off after the Colombian government accused Venezuela of allowing Colombian rebels to operate from Venezuela. Juan Forero at the Washington Post reports that the new Colombian President, Juan Manuel Santos, has indicated that the government is open to talks with FARC.

BRAZILIAN GROWTH Q-O-Q WAS 1.32%

Andre Soliani and Iuri Dantas at Bloomberg report that Brazilian growth from the second quarter over the first quarter was at 1.32%, "compared with a 2.45% jump in the first three months of the year."

"Latin America’s biggest economy is regaining speed in the third quarter, growing 5 percent to 6 percent, after slowing in the second quarter, Finance Minister Guido Mantega said yesterday. Brazil’s gross domestic product expanded 9 percent from a year earlier in the first quarter, the fastest rate since 1995, led by domestic demand and a record rate of investment."

FOMC LEAVES BENCHMARK INTEREST RATE UNCHANGED

The Federal Open Market Committee left the US benchmark interest rates at 0-0.25% yesterday. Real Time Economics hosts the full statement of the FOMC.

US TRADE DEFICIT RISES TO $50 BILLION

Free Exchange reports that the US trade deficit rose to $50 billion:



FOOD PRICES TO STAY HIGH IN NEAR FUTURE; US WILL TAKE ADVANTAGE OF RUSSIAN BAN ON WHEAT EXPORTS

Michael Schuman at the Curious Capitalist reports that food prices are likely to stay high by the standard of recent history.

"But whatever happens to wheat over the next few weeks, food is still expensive by the standards of recent history, and is likely to stay that way. The Organization for Economic Cooperation and Development and the Food & Agriculture Organization spelled that out in a June report. Their outlook sees average wheat and coarse grain prices between 15% and 40% higher in real terms (adjusted for inflation) over the next 10 years than their average levels during the period between 1997 and 2006. Real prices for vegetable oils are projected to be more than 40% higher, while dairy prices are forecast to be on average between 16% and 45% percent higher."

Meanwhile, Alan Bjerga at Bloomberg reports that the US has been contacted by grain importers to see if the US can fill orders for wheat that have been cut off by the recent ban on wheat exports by Russia.

[Agriculture Secretary Tom] Vilsack said he expects markets to stabilize as more information on the drought’s effects, including tomorrow’s USDA crop forecasts, becomes available.

EIA REPORTS THAT CRUDE OIL STORAGE FELL BY 3 MILLION BARRELS IN WEEK ENDED AUGUST 6TH

The EIA today reported that stocks of crude oil fell by 3 million barrels to 355 million barrels the week ended August 6th. The amount of crude in storage is well above the historical average. Gasoline stocks rose by 0.4 million barrels countercyclically and distillate stocks grew by 3.5 million barrels. Both are also well above the historical average. Refining capacity utilization fell to 88.1%. The national price of gasoline rose 4.8 cents to 278.3 cents in the week ended August 9th.

Daily Sources 8/9

1. SOUTHEAST ASIA BUYING WEAPONS AT BREAKNECK RATE

Jon Ponfret at the Washington Post reports that a recent publication by the Stockholm International Peace Research Institute shows that concerns over China's rise has pushed countries in Southeast Asia to almost double their weapons purchases from 2005 to 2009.

"The buying spree is set to continue, with reports that Vietnam has agreed to pay $2.4 billion for six Russian Kilo-class submarines and a dozen Su-30MKK jet fighters equipped for maritime warfare. This is in addition to Australia's stated commitment to buy or build nine more submarines and bolster its air force with 100 U.S.-built F-35s. Malaysia has also paid more than $1 billion for two diesel submarines from France, and Indonesia has recently announced that it, too, will acquire new submarines."

2. CHINA TO CLOSE 2,000 ENERGY INEFFICIENT FACTORIES

Keith Bradsher at the New York Times reports that China will close 2,087 steel mills, cement works and other energy-intensive factories by September 30 in order to try and increase its energy efficiency.

3. CHINA MAKES NO PUBLIC COMMENT ON SEIZURE OF ITS FISHERMEN

Brian Spegele at China Real Time reports that China has still made no public statement regarding the seizure of three fishermen by North Korea, allegedly for fishing in the North Korean exclusive economic zone.

4. HUGO CHAVEZ TO MEET NEW COLOMBIAN PRESIDENT TO TRY AND DAMP DOWN TENSIONS

Christopher Toothaker at the Associated Press reports that Hugo Chavez will meet the new Colombian president--Juan Manuel Santos--will meet in Colombia to discuss how to reduce tensions between the two countries.

5. PRESIDENT MEDVEDEV ARRIVES IN ABKHAZIA ON SUNDAY

CNN reports that Russian President Medvedev arrived Sunday in Abkhazia where he will meet with his counterpart, Sergey Bagapsh.

6. FORMER PRESIDENT OF MEXICO FOX CALLS FOR THE LEGALIZATION OF DRUGS

Jonathan J. Levin and Jens Erik Gould at Bloomberg report that the former President of Mexico, Vicente Fox, has called on the country to legalize drugs as a way of tamping down drug cartel violence.

8. COMPANIES ARE SEEKING LICENSES TO BUILD 22 NEW REACTORS

Chuck McCutcheon at the Christian Science Monitor reports that companies in the US are seeking licenses from the US Nuclear Regulatory Commission to build and operate 22 new reactors. A Gallup poll in March found that 62% of Americans now favor nuclear power.

9. US INCOMES FELL BY 1.8% IN 2009

Phil Izzo at Real Time Economics reports that US incomes fell by an average of 1.8% in 2009. The article includes a sortable chart of income growth by city.

10. KRUGMAN NOTES THAT CRITICAL INFRASTRUCTURE IN THE US IS BEING ALLOWED TO FALL INTO DISREPAIR

Paul Krugman at the New York Times reports that localities are letting their roads go to gravel, turning off the lights, and pushing through big cutbacks in education funding while the rest of the world is in the process of building up their infrastructure. A good read.

Daily Sources 8/5

1. THE ECB AND BANK OF ENGLAND MAINTAIN THEIR BENCHMARK INTEREST RATES

Gabi Thesing at Bloomberg reports that the European Central Bank left its benchmark rate at 1% today--the sixteenth month the rate has been at 1%.

"Separately, the Bank of England left its main rate at 0.5% and kept its bond-stimulus plan at 200 billion pounds ($318 billion)."

2. EVANS PRITCHARD ARGUES THE SPIKE IN WHEAT PRICES IS LIKELY TO GO DOWN; RUSSIA BANS EXPORT OF WHEAT FOR THE REST OF THE YEAR

Ambrose Evans Pritchard at the UK Telegraph says that the current problems with wheat are not the same as the problems which caused the 2008 wheat price spike. Global wheat stocks are much higher, the cost of oil is down, and there are likely to be bumper harvests in the US and elsewhere. In the meantime, Andrew E. Kramer and Jack Healy at the New York Times report that Russia announced today that it would ban grain exports through the rest of the year.

"In announcing the ban, which is in force from Aug. 15 to Dec. 31, Prime Minister Vladimir V. Putin said that Russia had sufficient stockpiles of grain but that blocking exports was an appropriate response to the worst drought in decades.

'We need to prevent a rise in domestic food prices, we need to preserve the number of cattle and build up reserves for the next year,' he said during a televised cabinet meeting, according to The Associated Press. 'As the saying goes: reserves don’t make your pocket heavy.'"

3. PEMEX REDUCES ACTIVITIES IN NORTHERN MEXICO DUE TO DRUG VIOLENCE

Upstream online reports that Pemex, the Mexican state oil company, has scaled back drilling and maintenance in the north's Burgos basin due to the deteriorating security situation there because of the ongoing drug violence in the region.

4. CHINA ADDED THE MOST WIND POWER IN 2009, SURPASSING THE US

Austin Carr in Fast Company reports that China overtook the US in 2009 in terms of added wind power capacity. Cumulatively, the US still has more wind power, but if this trend continues not for long.



5. RELIANCE TAKES THIRD STAKE IN MARCELLUS SHALE GAS

Rakteem Katakey at Bloomberg reports that Reliance Industries of India has agreed to pay $392 million for a 60% stake in acreages in the Marcellus shale-gas areas of central and northeast Pennsylvania held by Carrizo Oil & Gas Inc. This is the third US shale gas acquisition Reliance has made this year.

6. VIOLENCE IN DARFUR ON THE RISE

Neil MacFarquhar at the New York Times reports that violence in Sudan's Darfur region is on the rise again as the referendum on independence in southern Sudan approaches.

7. INITIAL JOBLESS CLAIMS CLIMB TO 479,000

Bob Willis at Bloomberg reports that "Initial jobless claims climbed by 19,000 to 479,000 in the week ended July 31, the most since April."

8. RETAIL SALES IN JULY WERE FLAT YEAR-OVER-YEAR

MasterCard's SpendingPulse reports that overall July sales were flat year over year.

"Michael McNamara, Vice President, Research and Analysis for SpendingPulse, observes 'Overall, retail sales continued to tread water, following the pattern set with June's sales when consumers demonstrated a reluctance to make larger purchases, and instead, traded down. Particularly, we are noticing some weakness in industry sectors that rely on higher priced ticket items such as furniture and discretionary areas such as luxury and jewelry. We are also seeing this pattern echoed in the restaurant business, where we have seen consumers shift from full-service restaurants and particularly fine dining, to limited-service and quick-service outlets.'"

Daily Sources 8/3

NETHERLANDS TO LEAVE NATO

Robert H. Reid at the Washington Post reports that the Netherlands became the first NATO country to withdraw its troops from Afghanistan this Sunday.

"Canada has announced that it will withdraw its 2,700 troops in 2011, and Polish President Bronislaw Komorowski has promised to pull out his country's 2,600 troops the year after."

EURO ZONE MANUFACTURING PMI WAS 56.7 IN JULY

Prieur du Plessis at Investment Postcards from Cape Town reports that

"The Euro Zone Manufacturing PMI of 56.7% for July released by Markit yesterday was even better than the earlier flash estimate of 56.5% − a number that surprised on the upside. Despite all the gloom and doom about the prospects for the euro zone, growth of both manufacturing production and new orders accelerated to the fastest growth since April while employment rose at its fastest rate in 26 months."

For a table of PMIs and their trends, click on the link.

CHINA'S US DOLLAR HOLDINGS NOT OUR PROBLEM

Yves Smith at naked capitalism pours cold water on the notion that Chinese holdings of large amounts of US dollar reserves is somehow the US's problem.

KUWAIT COMFORTABLE WITH $75 - $85 /B OIL

Bloomberg reports that Kuwait is comfortable with oil prices in between $75 and $85/b.

"'We are satisfied with the range of $75 to $85,' Sheikh Ahmad Al Abdullah Al Sabah said in Moscow on Tuesday. 'We don’t anticipate any cuts but we do encourage other OPEC countries to be more compliant.'"

MANUFACTURING PMIs FOR EMERGING ECONOMIES POINT TO GROWTH SLOWING

Prieur du Plessis at Investment Postcards from Cape Town notes that "the Markit Manufacturing PMIs for emerging economies generally point to growth slowing in the manufacturing industries in the respective countries." For a table of PMIs and their trends, click on the link.

TREASURY SECRETARY SAYS THE RECOVERY IS WITH US

Treasury Secretary Timothy Geithner has an op-ed at the New York Times entitled Welcome to the Recovery. My guess is that its more than a tad premature, but it's worth reading.

CONSUMER SPENDING STAGNATED IN JUNE

Timothy R. Homan at Bloomberg reports that consumer spending stagnated in June, with purchases unchanged after a revised downward increase of 0.1% in May. The savings rate increased to 6.4%.

PENDING HOME SALES FELL BY 2.6% IN JUNE

Peter Boockvar at the Big Picture reports that "[a]fter dropping a whopping 30% m/o/m in May after the expiration of the tax credit, Pending Home Sales unexpectedly fell by 2.6% in June vs a forecasted rise of 4%."

WORLD BANK PAPER CONCLUDES THAT BIOFUELS NOT THE CAUSE OF GRAIN PRICE SPIKE OF 2006-2008; WORST DROUGHT IN 50 YEARS IN RUSSIA DRIVING UP GRAIN PRICES AGAIN

Renewable Energy World.com reports that a new white paper from the World Bank concludes that biofuels were not responsible for the spike in grain prices from 2006 - 2008. Although the report concludes that ethanol was a factor, it points to a number of other factors that caused the price spike, including energy prices, speculation in the futures market, and poor weather conditions in certain areaas. Meanwhile, Maria Kolesnikova at Bloomberg reports that Russia is facing the worst drought in fifty years is threatening the winter grain sowing plans.

"Wheat jumped to a 22-month high in Chicago trading yesterday, extending a 38 percent advance in July that was the biggest since 1973."

Daily Sources 7/29

1. EUROPEAN ECONOMIC SENTIMENT HITS 28 MONTH HIGH

Marcin Grajewski at Reuters reports that consumer sentiment in Europe has hit a 28 month high.

"The European Commission said its economic sentiment indicator for the 16-nation currency area rose to 101.3 in July, a 28-month high, from an upwardly revised 99.0 in June."

2. GERMAN UNEMPLOYMENT FALLS FOR 13TH STRAIGHT MONTH

Rainer Buergin and Christian Vits at Bloomberg report that unemployment in Germany fell for the 13th straight month by a seasonally adjusted 20,000 to 3.21 million.

3. BANKS TO PREPARE FOR EUROZONE EXIT SCENARIOS

Eurointelligence reports that banks in Europe are preparing scenarios for eurozone states exiting the euro.

"The International Swaps and Derivative Association asked some of its members to form a group to consider what they may need to do if a eurozone state is ejected."

4. CZECH GOVERNMENT REFUSES TO SET DATE FOR EURO ADOPTION

Peter Laca and Ladka Bauerova at Bloomberg report that the Czech government has said that it refuses to commit to a date for euro adoption.

"[Prime Minister] Necas, 45, said the country will benefit from a flexible exchange rate as consumer prices converge with those in richer European Union-member states, and rapid euro adoption would risk fueling inflation. The koruna has gained 3.7 percent against the euro this month, the most among more than 170 currencies tracked by Bloomberg, making Czech exports more expensive.

'The government program will not include any target date or a promise to join the euro area,' Necas said today in an interview at his office in Prague. 'Exports are important, but this country is not only a country of exporters.'"

5. UK PRODUCTION OF GAS DOWN 14.3%

Platts reports that the UK's production of gas was down 14.3% in 2009 from 2008. "Gross natural gas production has fallen by 45% since its peak in 2000."

6. REGIONAL GROUPING TO DISCUSS COLOMBIA-VENEZUELA RIFT

BBC reports that Unasur, a regional grouping of foreign ministers, is set to discuss the rift between Venezuela and Colombia at its meeting in Quito today.

7. CONOCO WILL SELL ENTIRE STAKE IN LUKOIL

Sheila McNulty at the Financial Times reports that Conoco announced yesterday that it would sell its entire stake in Lukoil.

"Jim Mulva, Conoco chief executive, said the Lukoil investment had been aimed at doing joint deals and these had not happened."

8. IMF TO LEND UKRAINE $15.2 BILLION

Kateryna Choursina and Sandrine Rastello at Bloomberg report that Ukraine has secured a $15.2 billion, 2 1/2-year loan from the IMF.

"The Washington-based institution’s board of directors agreed to disburse $1.9 billion immediately, with subsequent payments subject to quarterly reviews.

“Ukraine is emerging from a difficult period during which the economy was severely hit by external shocks and exacerbated by domestic vulnerabilities,” John Lipsky, the fund’s first deputy managing director, said in a statement. “Authorities are committed to addressing existing imbalances and putting the economy on a path of durable growth, through important fiscal, energy, and financial sector reforms.” "

9. INITIAL UNEMPLOYMENT CLAIMS DOWN 11,000

Calculated Risk reports that

"In the week ending July 24, the advance figure for seasonally adjusted initial claims was 457,000, a decrease of 11,000 from the previous week's revised figure of 468,000. The 4-week moving average was 452,500, a decrease of 4,500 from the previous week's revised average of 457,000."

Daily Sources 7/20

1. BUNDESBANK SAYS CURRENT-ACCOUNT DEFICITS OF IRELAND, SPAIN, GREECE AND PORTUGAL THREATEN EUROZONE

Thomas Molloy at the Independent reports that the economic policies of Ireland, Spain, Greece, and Portugal represent a threat to the Eurozone as a whole and the entire Euro project.

"'These macro-economically erroneous trends' are 'a source of danger for other member countries and the currency region as a whole,' the Bundesbank wrote in its monthly bulletin. Deficit countries damage the eurozone's stability and 'it is urgently necessary to correct maldevelopments and avoid a repetition in the future'."

2. EUROPEAN COMMISSION TO BAN COAL SUBSIDIES BY 2014

James Kanter at Green reports that the European Commission has tentatively banned subsidies for coal mining starting 2014.

3. PEW SAYS THE DEVELOPED WORLD UNHAPPY WITH CHINA'S RISE

Free Exchange notes that concerns about China's economic might are high in the developed world. Much of the developing world ain't so keen on its rising military prowess either.



4. CHINA NOW THE WORLD'S LARGEST ENERGY USER

Grant Smith at Bloomberg reports that according to the IEA China is now the largest user of energy consuming 2,252 million metric tons of oil equivalent in 2009 versus the 2,170 million tons used by the US. Somewhat oddly, Shai Oster at China Real Time reports that the Chinese leadership has rushed to deny that it is now the largest energy user, saying that by their calculations the US remains top dog in that department.

5. JAPAN AND CHINA TO NEGOTIATE HOW TO DEVELOP UP EAST CHINA SEA GAS

Takeo Kumagai at Platts reports that Japan and China are seeking to schedule negotiations on how best to jointly develop the East China Sea gas fields which have been the source of some friction between the two governments.

6. US AND SOUTH KOREA TO CONDUCT NAVAL DRILLS NEXT WEEK

After a delay which caused some to speculate that the US was worried about upsetting China, Elisabeth Bumiller and Edward Wong at the New York Times report that the US and South Korea have agreed to hold naval exercises in the Sea of Japan and Yellow Sea next week. The exercises are in part a response to the sinking of a South Korean ship by a North Korean submarine four months ago. Beijing has strongly objected to the US holding naval drills in the Yellow Sea.

7. JAPAN TO CONSIDER ENERGY HUB AMBITIONS

Takeo Kumagai at Platts reports that Japan is considering using its spare storage capacity to act as an energy hub in the region. Japanese oil consumption is on a downward trend leaving considerable spare capacity. Some are considering using that spare capacity to export out into regional markets extra petroleum products, becoming the third trading hub in the region after Singapore and South Korea.

8. RUSSIA SENDS MISSION TO CLARIFY BORDER ON ARCTIC SHELF

Elena Kovachich at the Voice of Russia reports that

"The flagship of Russia’s polar fleet “Academician Fyodorov” has left for the Arctic on an expedition to clarify the outer border of the country’s continental shelf."

9. NABUCCO COMPLETES PUBLIC HEARINGS IN TURKEY

Alex Froley at Platts reports that the Nabucco pipeline project has completed the first round of public hearings in Turkey.

"Erdal Tuzunoglu, managing director for Nabucco Turkey, said: 'The completion of the public hearings is an important step towards the realization of the Nabucco project. The communities are very interested in the project and we feel that their concerns were addressed and discussed.'"

10. JUNE UNEMPLOYMENT BY STATE SHOWS IMPROVEMENT

Phil Izzo at Real Time Economics reports that the Bureau of Labor Statistics announced that most states--37--saw unemployment fall in June, while five saw an increase and in six there was no change. 27 saw a decrease in payroll employment while 21 saw an increase. Click on the link for neat interactive map and chart.

11. THE WHITE HOUSE ANNOUNCES FORMATION OF NATIONAL OCEAN COUNCIL

John M. Broder at Green reports that the White House yesterday announced the creation of a National Ocean Council. The new body will not have the power to create new regulations, but will attempt to coordinate the policy of overlapping institutions regulating ocean policy. Worth reading in full.

Daily Sources 7/14 (Bastille Day)

THE EU IS HALFWAY TO MEETING THEIR GOAL OF 20% RENEWABLE FUELS CONSUMPTION BY 2020

Reuters reports.

THE EURO'S INTERNATIONAL ROLE

The European Central Bank has released a 84 page paper on the international role of the Euro.

RUSSIAN SPENDING MORE THAN THE PRICE OF OIL WOULD ALLOW

Toni Vorobyova at Reuters reports that Russian spending is well above what the price of oil would allow without running a deficit.

GERMANS WORRIED THEIR RELATIONSHIP WITH RUSSIA IS COOLING

Matthias Schepp at Der Spiegel worries that the Merkel administration has not continued a strong tradition of courting Moscow, allowing other nations to attempt to get pride of place. In the meantime, John Roberts at Platts reports that RWE has decided to consider an offer from Moscow to join the South Stream pipeline plan, but loudly asserted its commitment to Nabucco.

BERLIN CONSIDERS AUCTIONING OFF EXTRA TIME FOR NUKE PLANTS

David Crossland at Der Spiegel reports that the Merkel Administration, which wants to bypass the plan to shutter all nuclear power plants by 2020, is considering auctioning off more time for the plants to operate. That is, the power companies could bid for additional time past 2020 in which they could operate. A key reason for the idea is that nuclear power makes it easier to meet carbon reduction goals.

SPANISH SOLAR POWER NOW BIGGER THAN US

Sharon Hong at News Watch Energy reports that with the commissioning of a new solar plant Spain now leads the US in solar power energy production.

SOUTH KOREAN PLAN FOR PRIVATE COS TO SPEND $18 BILLION ON GREEN TECH SMOKE AND MIRRORS

Christian Oliver at FT Energy Source warns us that the news yesterday that the plan for South Korean companies to spend $18.6 billion on green technologies is not quite what it seems.

NIGERIAN CRUDE EXPORTS TO US ON THE RISE

Jacinta Moran at Platts writes that NIgerian exports to the US are averaging 945 kb/d in the first quarter of 2010, up from 606 kb/d in the same quarter last year. A key reason is that efforts to mollify Niger Delta rebels have had some success. Meanwhile, Sharon Hong at News Watch Energy reports that the Nigerian state oil company is insolvent as it waits for the government to pay it its subsidies.

MORE THAN 4 PEOPLE ARE LOOKING FOR JOBS FOR EACH AVAILABLE JOB

Per Mark Thoma at Economist's View:



OIL PRICES MODERATING SOMEWHAT IN US

James Hamilton at Econobrowser updates some charts he uses to monitor energy costs in the US, including a chart of US retail gasoline prices.



Note that prices are in the range where they begin to affect driving behavior in the US, or $2.50/g. They are just short of $3.00/g where prices will have a strong effect on driving behavior.

CRUDE OIL STOCKS DOWN 5.1 MILLION BARRELS

The EIA reports that crude oil stocks fell by 5.1 million barrels in the week ended July 9th, though they are still well above the 5 year historical average. Gasoline stocks built by 1.6 million barrels and distillates grew 2.9 million barrels. The average price of gasoline for the week ended July 12th fell by 0.8 cents to 271.8 cents/gallon. For the week ended July 9th, refinery utilization grew to 90.5%.

Daily Sources 7/13

WILL CHINA'S DEBT EXPLOSION BITE IT IN THE BUTT?

Asks Michael Schuman at the Curious Capitalist.

THE NOTION OF A EUROPEAN-NORTH AFRICAN SUPER-GRID GAINING GROUND

FT Energy Source reproduces an interview with Gregor Czisch of Germany’s Kassel University, who argues that such a supergrid would not be more geopolitically compromising than the current dependence on natural gas.



SOUTH KOREAN INDUSTRIES TO SPEND $18.5 BILLION ON GREEN TECHS TO 2013

Shinhye Kang at Bloomberg reports that South Korean companies plan to spend $18.5 billion in clean energy technologies to capture government spending on green technology and jobs. In the meantime, Choe Sang-Hun at the New York Times reports that there may be some friction between Seoul and DC when they begin renegotiating their nuclear fuel treaty later this year. Nuclear energy provides about 40% of South Korea's electricity. Seoul wants to reprocess the nuclear fuel; the US is opposed because reprocessing makes making nuclear weapons a simpler prospect.

PUTIN EXTENDS FUEL SUBSIDIES FOR FARMERS FACING DROUGHT

Maria Kolesnikova at Bloomberg reports that Prime Minister Putin has agreed to continue fuel discounts to farmers in Russia, who are facing the worst drought in a decade.

OPEC PREDICTS 2.1% INCREASE IN GLOBAL OIL DEMAND IN 2010

Robert Perkins at Platts reports that the IEA predicts a 2.1% increase in global oil demand in 2010, or an additional 1.8 million b/d rise from 2009. For 2011, the IEA predicts a 1.3 million b/d year-on-year growth in global oil demand to 87.8 million b/d. The slowing demand growth comes on top of predictions of growing global GDP.

BASHIR CHARGED WITH GENOCIDE BY INTERNATIONAL CRIMINAL COURT

Colum Lynch and Rebecca Hamilton at the Washington Post report that the International Criminal Court has charged the sitting Sudanese President, Omar Hassan al-Bashir, with genocide. David Eggers and John Pendergrast opine in the New York Times that the US should threaten Sudan to try and ensure that the North-South peace referendum takes place in January. Right now it looks to them that war is inevitable between them. Although they make room for the ICC's recent holding, it is not clear to me how it would be likely to produce a peaceful solution to the emerging problem.

PEMEX TO SELL DOLLAR BONDS

Gabrielle Coppola and Andres R. Martinez at Bloomberg report that Pemex, Mexico's national oil company, will sell at least $500 million in dollar bonds, yielding 250 basis points over US Treasuries today.

BOSTON FED PRESIDENT WORRIED MORE ABOUT DEFLATION THAN INFLATION

Jon Hilsenrath at Real Time Economics reports that Federal Reserve Bank of Boston President Eric Rosengren is more concerned about the possibility of deflation than of inflation.

“The core inflation rate is right around 1%,” he said. “Given the amount of substantial excess capacity that we have in the economy, there is some risk of further disinflation. And I would say the risk of deflation has gone up and is more of a risk than I would like to see at this point.”

Rebecca Wilder at News N Economics reports that inflation expectations for all the developed countries appear to be going down.



Edward Hugh at Fistful of Euros argues that there is a global slowdown in the works.

Daily Sources 7/7

1. CHINA'S US TREASURY HOLDINGS UP $5 BILLION IN APRIL

Bloomberg reports that China's State Administration of Foreign Exchange urged markets to not consider changes in US treasuries political statements. It further indicated that gold is not likely to become a major part of its reserves holdings because of its volatility and lack of interest payments. Some think this is just Beijing talking its book so it can buy further gold at depressed prices. Last year Beijing doubled its gold holdings.

2. FREE EXCHANGE HOSTS A NEAT INTERACTIVE MAP OF THE EU



3. NEW POLISH PRESIDENT AN EUROPEANIST

Greg Scoblete at Real Clear World reports that the new Polish President is a committed Europeanist as opposed to his predecessor, who was a committed Atlanticist.

4. US RHETORIC IN GEORGIA DESIGNED TO CALM FEARS IN T'BLISI

Mary Beth Sheridan at the Washington Post reports that in her visit to Georgia, Secretary Clinton indicated the US's opposition to Russia's "invasion and occupation" of Georgia. Prime Minister Putin took issue with the characterization of the Secretary of State, calling the Russian troop presence an effort to liberate the Abkhazians and South Ossetians.

5. DRILLING IN GREENLAND'S ARCTIC WATERS BEGAN LAST WEEK

Kate MacKenzie at FT Energy Source reports that deep water drilling in Greenland's Arctic waters began last week. And so the race for Arctic natural resources begins.



6. AUSTRALIA KEEPS BENCHMARK RATE AT 4.5%

Jacob Greber at Bloomberg reports that Central bank Governor Glenn Stevens yesterday left the benchmark cash rate at 4.5% for a second month. Australia's central bank had raised interest rates six times since October when it stood at a low of 3%. Inflation is expected to increase to more than 3% in the coming months.

7. INDIA DEPLOYS TROOPS IN KASHMIR IN EFFORT TO SUPPRESS UNREST

Lydia Polgreen at the New York Times reports that the Indian Army has deployed troops in Kashmir in an effort to calm the region after large street protests resulted in paramilitary units firing into the crowds.

8. RUMORS THAT MUBARAK'S HEALTH IS IN SERIOUS DECLINE

Michael Collins Dunn at the MEI Editor's Blog reports that Ha'aretz has picked up a rumor from a London-based daily that Mubarak's trip to France was for medical reasons. The story is that Mubarak's health is in serious decline and that his son is in line for succession.

9. OBAMA EXPECTS NETANYAHU TO BEGIN TALKS WITH PALESTINIANS BEFORE MORATORIUM ON NEW SETTLEMENT BUILDING EXPIRES IN SEPTEMBER

Sheryl Gay Stolberg and Mark Landler at the New York Times report.

10. BANK CARD DELINQUENCIES FALL BELOW 4%; SERVICE SECTOR NOT ADDING JOBS QUICKLY ENOUGH

In a good sign for the economy, Darrell A. Hughes at Real Time Economics reports that bank credit-card delinquencies dropped below 4% for the first time in eight years.

[ABA Chief Economist James] Chessen said the anticipated slow growth is unlikely to cause delinquencies to rise significantly, but there could be some impact. 'Until we get a sustained level of new jobs in this economy, we’re not going to see delinquencies fall to very low levels,' he said.

In the meantime, Phil Izzo at Real Time Economics reports that the Institute for Supply Management subindex for employment fell below 50, indicating a fall in employment.


11. THE EIA REPORTS THAT CRUDE STORAGE IS DOWN 2 MILLION BARRELS, STILL 12.9 MILLION MORE IN STORAGE THAN LAST YEAR

The EIA reports that crude stocks fell to 363.1 million barrels, down 2 million from last week, up 12.9 million from last year. Gasoline stocks rose by half a million while diesel stocks rose 2.5 million. Average US gasoline prices rose by 1.4 cents to 275.7 cents the week ended June 28. In the week ended June 25, refinery capacity utilization stood at 88.4%, down 1% from the week previous.

Daily Sources 8/6

1. JAPANESE GOVT REPORT COMPARES PARTY PLANS FOR GREENHOUSE GAS EMISSIONS REDUCTIONS ON ECONOMY

Yoko Kubota at Reuters reports that the plan by Japanese opposition party to cut greenhouse gas emissions by 25% from 1990 levels by 2020 would, per a government report, "push down real gross domestic product growth by 3.2 percentage points and the unemployment rate could grow by 1.3 percentage points." The government plan for an 8% reduction from 1990 levels by 2020 would, per the report, "push down Japan's economic growth by 0.6 percentage points and raise unemployment by 0.2 percentage points in 2020."

2. PBOC'S MONETARY REPORT INDICATES EASY CREDIT POLICY TO CONTINUE, MINISTRY OF HUMAN RESOURCES WARNS EMPLOYMENT SITUATION GRAVE, ELECTRICITY DATA SHOWS STEEP FALLS IN CONSUMPTION, BANKS LEND LESS IN JULY CONTRA PBOC REPORT, AND BP SAYS GDP DATA MORE OR LESS TRUSTWORTHY

Andrew Batson at the Wall Street Journal reports that the People's Bank of China's quarterly monetary report reaffirmed its commitment to continuing easy credit policies.

"'China's economy is now in a critical period of stabilization and recovery, and maintaining stable and rapid economic growth is still the most important task we face ... . Although the general trend of stabilization in the [global] economy has been basically established, the process of recovery may be slow and tortuous.'

With global demand for China's exports still weak, a solid rebound depends on domestic consumption and investment, the central bank said. Chinese companies may be more willing to ramp up production now that inventories have been reduced.

Sentiment among private-sector businesses remains weak, it said, and consumers' worries about future income could crimp spending. 'The foundation of the economic recovery is not yet stable,' it said, echoing other agencies' recent comments."

In a somewhat different take on the question of whether migrant unemployed in China are a reason to worry from the story cited yesterday--see Daily Sources 8/5 #1--Yves Smith links to an AFP report that

"China Tuesday warned of a 'grave' situation in the jobs market with millions of graduates and migrant workers yet to find work as companies continue to struggle with the effects of the global slump...

'China's current employment situation is still grave and the pressure for job creation remains large,' said Wang Yadong, a senior official at the Ministry of Human Resources and Social Security's employment section."

She also notes that:

"First-half electricity use by small and medium-sized enterprises fell almost 50% year-on-year, as these companies were more exposed to the economic downturn, the National Bureau of Statistics said on August 3.

SMEs saw power consumption plunge 48.9% year-on-year, against a 5.9% industry-wide drop."

And in contrast to the affirmation of the People's Bank of China in its quarterly report mentioned above:

"China's big state-owned commercial banks extended around 168 billion yuan worth of new loans in July, down sharply from the 497 billion issued in June, banking sources told Caijing on August 4."

And she picks up on the story in the FT yesterday that if you add up the output numbers of the various provinces, they are 10% more than overall national output as reported by Beijing. And to muddy the waters further, Sheetal Nasta at Platts reports that the chief Asia economist of BP, Chi Zhang, said at an event at the British Chamber of Commerce in Shanghai Wednesday that

"'in general, [the] data reflects economic growth reality,' given that China is 'very manufacturing intensive and there has been a lot of industrialization and an urbanization process is going on.'

While he admitted the Chinese have been likely 'taking advantage of low energy prices,' he retreated from the notion that government stockpiling was inflating prices.

Speaking of the oil price spike in 2008, he said data from BP's annual statistical review, issued earlier this year, shows that the 'big spike' in (price) coincided with related economic activity, primarily supply-side constraints due to investment shortfalls, geopolitical issues and few technological breakthroughs."

The continuing incredulity regarding official output growth numbers in China was driven by the disparity between the electricity consumption numbers, which are no longer published--see Daily Sources 6/8 #6--later reinforced by skepticism expressed in the May report by the International Energy Agency which suggested that oil demand would have been stronger than reported if it were to reconcile with the GDP numbers and suggested the possibility that "Real GDP data aren’t accurate and shouldn’t be taken at face value"--see Daily Sources 5/14 #2.

3. GERMAN FINANCE MINISTER SAYS FINANCIAL SECTOR RETURNING TO 'CASINO CAPITALISM', ECB MAINTAINS BENCHMARK RATE AND INDICATES THERE WILL BE NO ADDT'L STIMULUS

Der Spiegel reports that Finance Minister Peer Steinbrück is in the media warning against the return of 'casino capitalism.' Among other comments, he said:

"In the United States and Britain, lobbyists are already questioning some regulatory measures."

and, in Germany,

"Taxpayers are continuing to completely finance big bonuses [at banking firms]."

Meanwhile, Christian Vits and Simone Meier at Bloomberg report that European Central Bank president Jean-Claude Trichet indicated that the bank is unlikely to provide further stimulus after its monetary committee left the benchmark interest rate at 1%.

"Rates are 'appropriate' and policy makers are 'satisfied' with their asset-purchase program and measures to improve the flow of credit, he said."

"The ECB currently predicts the euro-region economy will contract about 4.6% this year and 0.3% in 2010. Inflation will average about 0.3% this year and 1% in 2010. The bank aims to keep inflation just below 2%."

4. BANK OF ENGLAND TO EXPAND QUANTITATIVE EASING, LONDON TO REPLACE SHORT HAUL AVIATION WITH HIGH SPEED RAIL

Niel Shah at the Wall Street Journal reports that the Bank of England today announced it would expand its quantitative easing program, increasing purchases by £50 billion (~ $85 billion) to a total of £175 billion.

"The increase required the bank to get special permission from the UK Treasury, which had previously capped the program at £150 billion.

The expansion of the program suggests policy makers are still worried about the long term outlook for the UK economy despite a recent spate of positive data pointing to recoveries in house prices, manufacturing and services."

"While banks' reserves of cash have more than tripled since the central bank launched the program back in March, one broad measure of lending in the economy--M4 money supply excluding certain financial intermediaries--has hardly budged. In the second quarter, the measure was up just 3.1% from the same period a year earlier, the weakest expansion since 1999.

Beyond that, rising unemployment and peoples' efforts to pare down heavy debt loads are likely to weigh on consumer spending, by far the largest driver of demand in the UK economy. As of May, the UK unemployment rate stood at 7.6%, the highest level in 12 years."

Meanwhile, Dan Milmo and Julian Glover at the Guardian report that Downing Street has announced plans which would replace domestic air travel with a high speed--250 mph--rail.

"The transport secretary, Lord Adonis, said switching 46 million domestic air passengers a year to a multibillion-pound north-south rail line was 'manifestly in the public interest'. Marking a government shift against aviation, Adonis added that rail journeys should be preferred to plane trips.

'For reasons of carbon reduction and wider environmental benefits, it is manifestly in the public interest that we systematically replace short-haul aviation with high-speed rail. But we would have to have, of course, the high-speed network before we can do it,' he said."

5. GEORGIAN AND RUSSIAN OFFICIALS TRY TO CALM WORRIES ABOUT NEW FIGHTING BREAKING OUT, SAAKASHVILI LAYS BLAME FOR 2008 CONFLICT ON MOSCOW IN OP ED

Jim Heintz at the Associated Press reports that senior officials in Tblisi and Moscow are walking back from rhetoric suggesting the possibility of renewed fighting.

"The deputy chief of Russia's general staff says Georgia is too weak after the war that devastated its military and caused an estimated $1 billion damage to the struggling country.

Georgia's national security adviser, however, says the danger of new fighting appears low because of 'preventive diplomacy' and because Russia knows a new war would undermine its influence among neighbors and rapprochement with the West."

In the meantime, Georgian President Mikheil Saakashvili has an op ed in today's Washington Post which lays the blame on last year's conflict squarely on Russia. Key excerpt:

"Russian provocations have not stopped; snipers in Russian-controlled areas have killed 28 Georgian policemen. In recent days, Moscow has engaged in a series of provocative acts and statements, echoing its prelude to last year's invasion. Even as the world watches, Moscow has vetoed monitoring missions from the United Nations and the Organization for Security and Cooperation in Europe. In violation of the cease-fire, Russia also denies European Union monitors access to the occupied territories.

Despite all this, and contrary to some expectations, Georgia has rebounded. Our democratic institutions are growing. Foreign investors are returning. The world should recognize that the kind of behavior Russia exhibited last August threatens not only Georgia but our entire region."

6. TURKISH PM MEETS WITH HEAD OF LARGEST TURKISH KURD PARTY, ANKARA SIGNS ON TO SOUTH STREAM

Nicholas Birch at the Wall Street Journal reports that Prime Minister Recep Tayyip Erdogan of Turkey met with the leader of the main Kurdish party in the country Wednesday, in what is the first meeting of the head of government with the party in the country's history.

"[M]any analysts say the new Kurdish opening is qualitatively different from anything that came before.

'For the first time ever, Turkish state institutions are working in synch to solve the problem,' said Henri Barkey, a Turkish expert at the Carnegie Endowment for International Peace, a Washington-based think tank.

The main catalyst for Turkey's new sense of urgency is Washington's announcement that it plans to pull its soldiers out of Iraq, Turkey's southern neighbor, by 2011.

The planned withdrawal has speeded up a rapprochement between Turkey and Iraqi Kurds, whose relations have been blighted for years by the PKK's use of Iraqi Kurdish mountains for its military bases."

"'There is an economic side to the rapprochement. "Turkey wants to use northern Iraqi gas for Nabucco,' says Bayram Bozyel, a Turkish Kurdish politician, referring to a pipeline project that the US and EU hope will help break a Russian stranglehold on European natural-gas supplies. 'And the [Iraqi] Kurds want to pump gas north.' That would be risky in the midst of a guerrilla war. The PKK claimed responsibility last year for a bomb attack on a major oil pipeline that passes through the same region."

Well worth reading.Today Russia and Turkey signed a deal to route Russia's South Stream pipeline through Turkey, per Charles Recknagel at RFE/RL.

"'The South Stream pipeline is a much needed project that is particularly important in the context of ensuring the energy security of the whole of Europe and the development of a broad range of ties between Russia and Turkey,' Putin said. 'Our negotiations showed that we can find solutions, together with the Turkish leadership, that open the way to new, large-scale energy projects.'"

7. IRAN LOWERS OFFICIAL PRICE OF OIL SOLD TO ASIA, QATAR LOWERS OFFICIAL PRICE OF OIL, FOLLOWING SAUDI ARAMCO REDUCTION ON PRICE TO ASIA

Yee Kai Pin at Bloomberg reports that the National Iranian Oil Company will reduce the official selling price of Iranian Light into Asia for the first time in four months.

"[NIOC] will set Iranian Light for September at 9 cents a barrel above the average of Persian Gulf benchmarks Oman and Dubai grades, based on a quarterly formula tied to prices set by Saudi Arabian Oil Co. The premium will be down $1.75, or 95%, from August and will be the smallest in seven months."

Meanwhile, Yee Kai Pin reports that Qatar Petroleum will also reduce the official selling price of Qatari crudes.

"The state-owned company cut its July price of Qatar Land crude oil to $65.50/b, down $5.60 from June, the official Qatar News Agency said on its Web site. The July price of Qatar Marine grade was reduced by $5.38 to $64.72/b. The cuts are the first in five months."

Earlier this week, Saudi Aramco cut its official selling price of Arab Light into Asia--see Daily Sources 8/3 #6. (The middle eastern national oil companies have different official prices for different regions of the world.)

8. DUBAI'S PROPERTY PRICE COLLAPSE SHARPEST IN WORLD

Kevin Brass at the New York Times reports that Dubai's property market is leading the world in price collapse.

"Dubai prices have dropped 32% in the last year and 40% in the last quarter, according to the latest edition of the Knight Frank Global House Price Index, released today.

Along with Dubai, Latvia (36%) and Singapore (23.8%) saw the largest declines since the first quarter of 2008, the property firm reports."

9. MEND LEADER INDICATES MOST NIGER DELTA MILITANTS WANT TO TAKE ADVANTAGE OF AMNESTY PROGRAM WHICH OFFICIALLY BEGAN TODAY; ANALYSTS DOUBT DIRE NIGERIAN PRODUCTION NUMBERS

Dulue Mbachu at Bloomberg reports that the leader of Nigerian militant group MEND indicated in a telephone interview that most fighters want to accept the government's amnesty program, saying "Like the government, we also want peace for there to be development."

"A government panel set up last year recommended raising the share of revenue going to states in the oil region to 25% from the current 13%. MEND wants the oil region to control 100% of oil revenue and pay a tax to the central government, according to the group’s spokesman, Jomo Gbomo.

'Whatever the people are demanding is also what I want,' Okah said, declining to commit to a figure.

The MEND leader said militant commanders in the oil region are divided between those who want money in exchange for weapons, as offered by the government, and those who want their political demands met.

'Personally I want a situation where weapons will be surrendered without cash,' Okah said. 'Because people can submit their weapons and buy new ones.'"

BBC News reports on the amnesty program which officially began today.

"Officials said gunmen who accept amnesty would be given 65,000 naira ($433; £255) a month for food and living expenses during the rehabilitation program, which runs from 6 August to 4 October.

But the main rebel group in the region, the Movement for the Emancipation of the Niger Delta (MEND), has not yet said it will take part in the amnesty.

'When we choose to disarm, it will be done freely, knowing that the reason for our uprising which is the emancipation of the Niger Delta from neglect and injustice has been achieved,' the group said in statement e-mailed to the AFP news agency.

The group, which called a temporary ceasefire last month after one of its leaders was freed from jail, is in talks with senior officials about the terms of any possible amnesty."

Tom Burgis at FT Energy Source reports that many believe that the current numbers for oil production coming from official Nigerian government sources are deliberately understated.

"On Wednesday afternoon, a Nigerian oil executive speaking in private snorted at the idea that production could be so low, suggesting 1.6m b/d was more accurate. Stewart Williams, principal sub-Saharan Africa analyst at energy consultancy Wood Mackenzie, puts production at 1.5m b/d to 1.6m b/d.

Why the discrepancy? Analysts with a cynical streak (easily acquired in a country so riddled with corruption and electoral violence) remark that it is in the state’s interest to create a sense of crisis as it tries to force through a comprehensive reform of the oil sector.

That the bill has merits--including the promise of greater transparency and restructuring the hopelessly ineffective state company--misses the point. Oil companies and the delta’s influential governors, who stand to get less cash as a result, are united in opposition to it.

The oil companies, too, are making data scarce at the moment. Like the government, they may have an interest in uncertainty as the negotiations continue."

10. BRAZILIAN SENATE'S INVESTIGATION INTO PETROBRAS TAX EVASION AND CORRUPTION CHARGES BEGIN TODAY, LULA INDICATES THAT HE BACKS FULL CONTROL OF PRE-SALT FOR PETROBRAS

Helder Marinho and Alexander Ragir at Bloomberg report that the Brazilian Senate's investigation into tax evasion and corruption allegations against state oil company Petrobras began today.

"An 11-member Senate committee, led by a member of [Brazilian President Luiz Inacio Lula da Silva's], Workers’ Party, is investigating the allegations. [CEO Jose Sergio] Gabrielli told Petrobras’s 74,000 employees in a July 14 letter that the company fired three employees after an internal investigation, and cooperated with the prosecutor’s office and federal police, into the bidding process for oil platforms.

Gabrielli, Chief Financial Officer Almir Barbassa and Haroldo Lima, the head of Brazil’s petroleum regulator, are among officials the committee in charge of the probe will invite to testify, according to a list senators handed to reporters during a session of the probe committee held today.

The officials will not be legally summoned or required to speak under oath, and the hearings will be arranged at their convenience, Senator Romero Juca said today in Brasilia. Juca, the head of the government coalition in the Senate, is responsible for leading the probe and writing its reports. Fired Petrobras executives will not be called to testify, he said."

"Since Lula first took office in January 2003, lawmakers have set up 25 committees to investigate everything from health insurance plans to piracy of industrial goods and corruption, according to CAC Consultoria Politica, a Brasilia-based political consultancy. While some ended without any conclusion, a 2005 investigation into allegations the Workers’ Party paid bribes to legislators in exchange for votes in Congress led to the resignation of Lula’s chief of staff, Jose Dirceu."

Natuza Nery at Reuters reported yesterday that Lula was to propose to Congress today that Petrobas be the exclusive operator of new offshore sub-salt oil fields. In June, resolutions were being introduced in the Brazilian Senate to create a new, 100% state-owned company, to lease Brazil's sub-salt fields--see Daily Sources 6/12 #11. (A majority of voting shares in Petrobras are owned by the government, but foreign investors own about 60% of its total outstanding stock.)

11. VENEZUELA TO PURCHASE SEVERAL DOZEN TANKS FROM RUSSIA, BANS COLOMBIAN STATE OIL COMPANY FROM PARTICIPATION IN ORINOCO BELT

Fabiola Sanchez at the Associated Press reports that President Hugo Chávez in a news conference yesterday said that Venezuela was going to purchase several dozen Russian tanks in a deal he wants to seal during a visit to Russia in September.

"'We're going to buy several battalions of Russian tanks,' Chavez said ...

Chavez's government has already bought more than $4 billion worth of Russian arms since 2005, including helicopters, fighter jets and Kalashnikov assault rifles.

The socialist leader called Colombia's plan to host more US soldiers a 'hostile act' and a 'true threat' to Venezuela and its leftist allies. He warned that a possible US buildup could lead to the 'start of a war in South America,' but gave no indication that Venezuela's military is mobilizing in preparation for any conflict."

"Cuban ex-President Fidel Castro supported Chavez in a column published Wednesday on the Cubadebate Web site, saying that 'Venezuela isn't arming itself against the sister nation of Colombia, it's arming itself against the (US) empire.'

'The threat ... is directed at all the countries' of South America, Castro wrote."

Meanwhile, Upstream online reports that Chávez told journalists yesterday that Ecopetrol, Colombia's national oil company, will have no role in developing the Orinoco belt.

"Chávez said ... that Colombia’s increased cooperation with the US to fight guerrillas and drugs is part of the US’s long- term plan to invade Venezuela and seize the Orinoco Belt."

"Ecopetrol was one of 19 companies that paid $2 million apiece for detailed information on the Carabobo block in the Orinoco Belt."

12. 24% OF OWNER-OCCUPIED HOMES UNDER WATER IN US, PERSONAL SAVINGS RATE INCREASE AHISTORICAL IN FACE OF REDUCED FEDERAL TAX RECEIPTS, AND AS UNEMPLOYMENT LOOKS SET TO CONTINUE TO RISE

Nick Timiraos at Developments reports that 24% of owner-occupied homes had mortgage debt which exceeded the market value of the home in question at the end of June, according to data from Equifax and Moody’s Economy.com.

"That number rises to 32% when looking at the share of homeowners with mortgages that don’t have equity left in their homes.

Overall, 16 million homeowners are 'upside-down' on their mortgages, up from 10 million, or 15% of owner-occupied homes, one year ago.

Nearly 10% of owner-occupied homes now have mortgage debt with loan-to-value ratios of at least 125%, and roughly half of those homes have mortgage debt with loan-to-value ratios of 150% or more."

In her most recent series of posts, Rebecca Wilder at News N Economics notes that a) this recession is different from past recessions in the sense that the personal savings rate is trending up:



And b) that the Daily Treasury Statement of August 4 "shows that the 1-month cumulative sum of income tax receipts (withheld plus paid taxes) is dropping at a 13% annual pace." She comments:

"This is the most up-to-date macroeconomic information out there, as most of the reports are 1-2 months old at the time of release. And the implication of this DTS is: that personal income and spending, which just released this week for June ... are likely to be weak into July."

In that vein, Barry Ritholtz links to a graph by Bruce Murray, CEO of WANTED USA, plotting the actual month over month change in non-farm unemployment against year over year percent change in hiring demand:



13. RAIL TRAFFIC VOLUMES BOTTOMED OUT AT 18.9% BELOW LAST YEAR'S NUMBERS

The Railfax report is out today, and seems to indicate that rail traffic volumes have reached a bottom and holding steady at about 18.9% below their seasonal levels. Their chart for weekly loaded units in North America for the week ended August 1 in four week rolling averages:



Their chart for crushed stone and lumber and wood products, key components in construction, in four week rolling averages for North America:

Daily Sources 8/5

1. CHINESE TRANSPORT DATA SHOW YOY INCREASE IN IRON IMPORTS OF 35%; PROPERTY SALES IN CHINA FALL 4% IN JUNE; UNEMPLOYED MIGRANT WORKER CONCERNS PROVE OVERBLOWN; THE PEOPLE'S BANK OF CHINA WARNS OF THE DANGERS OF QUANTITATIVE EASING

Bloomberg reports that in the Ministry of Transport data released yesterday ships unloaded 35% more iron ore in July from July 2008. "Ships unloaded 56.5 million metric tonnes of iron ore in July at major ports." Meanwhile, China Daily reports that property sales across 30 Chinese cities fell by 4% in July from June. Property prices for 70 major Chinese cities rose by 0.8% in June.

"Property transactions in Guangzhou [formerly Canton, the capital of Guangdong province] fell 36% over June. The figure is only half of that of May, said Guangzhou's official property website.

'The fall has been triggered by high property prices and shrinking supplies in some cities,' said Qin Xiaomei, head of research, Jones Lang LaSalle Beijing. 'Property developers have slowed down the pace of new projects in the second half after robust sales in the first half,' she said."

Meanwhile, Andrew Batson at the China Journal reports that worries regarding large numbers of unemployed migrant workers have proven overstated. The IMF China mission chief, who visited the country in late May early June, told reporters in a conference call:

"I think our sense is that while there is certainly some dislocation in the labor markets as export sectors in the coastal regions have declined, but in general that process of reallocation of labor has been relatively smooth. Part of it has been that labor has returned back to export sectors, perhaps with some reduction in real wages, and been reabsorbed into those areas.

Part of it is that the interior of the country is doing quite well, and so some of that migrant labor has moved geographically across regions to where growth is stronger. And I think we’re seeing right now a dynamic where the historical pattern of very strong growth in the coastal regions and slower than average, national average growth in the interior is reversing, and you’re seeing much stronger growth in rural areas and in the interior provinces. And some of that labor has been reabsorbed into public infrastructure projects."

Meanwhile, Bloomberg News reports that the People's Bank of China yesterday in its quarterly monetary policy report warned that the quantitative easing policies of the developed nations threatens to spark sever inflation and currency volatility.

"Exiting too quickly from such policies, which the Chinese central bank said helped to prevent a repeat of the Great Depression, may undermine an economic recovery, the report said. Waiting for too long may trigger 'a new round of asset bubbles and severe inflation,' the central bank added.

'Central banks in major developed nations face a difficult choice between keeping government bond yields relatively low to promote economic recovery and maintaining currency stability' to protect national creditworthiness, it said."

2. UK ENERGY SECURITY ENVOY TO RECOMMEND TRIPLING NUCLEAR ELECTRICITY GENERATION CAPACITY; JULY SERVICES INDEX SHOWS SIGNIFICANT IMPROVEMENT

Robin Pagnamenta at the Times reports that the UK's Prime Minister’s special envoy on energy security, Malcolm Wicks, will publish a report today arguing that Britain should triple the amount of energy it generates from nuclear power. A Times source familiar with the report said it would argue:

"The question is whether or not the same rigor [that is being devoted to cutting emissions] is being applied to energy security.

The Government has not been good at asking serious questions about whether or not the UK is in the right place ... It’s a dangerous world and when we emerge from recession there will be a global grab for diminishing supplies of energy. Where is it all going to come from?"

Meanwhile, Vanessa Houlder at the Financial Times reports that the Markit Economics purchasing managers survey of the services sector rose to 53.2 in July from 51.6 in June, it's highest reading since February 2008. It is the third consecutive month with a reading above 50--above 50 indicates expansion and below indicates contraction.

"Analysts welcomed the latest figures as providing more evidence the recession was receding. Vicky Redwood, of Capital Economics, said: 'The latest UK data on both services and manufacturing suggest that a decent recovery is continuing across the economy.'

Kevin Daly, of Goldman Sachs, said the 'very strong' services survey was consistent with annualized growth in gross domestic product of between 1.5% and 2%."

3. TWO RUSSIAN SUBS PATROLLING OFF US COAST

Mark Mazzetti and Thom Shanker at the New York Times yesterday reported that two nuclear-powered attack submarines have been patrolling off the eastern coast of the US recently.

"'I don’t think they’ve put two first-line nuclear subs off the US coast in about 15 years,' said Norman Polmar, a naval historian and submarine warfare expert.

The submarines are of the Akula class, a counterpart to the Los Angeles class attack subs of the United States Navy, and not one of the larger submarines that can launch intercontinental nuclear missiles."

Galrahn at Information Dissemination notes that the report suggests that the submarines are staying out of the Economic Exclusion Zone--about 200 miles off the coast. He also asks why this information was leaked.

4. PAKISTAN TALIBAN SEES ITSELF AS PROVIDING GOOD GOVERNMENT

Qandeel Siddique at jihadica summarizes an Urdu-language interview of a Taliban commander in Pakistan. Key excerpt:

"The Swati Taliban claims to have the locals on their side: '… We are children of these people and they are our own. We live like brothers. We have a healthy relationship with them where they give us food and shelter, and we cooperate on matters. We are always in touch with the locals and share with them their burdens/grievances. We have built roads [for the Swati people] where in over 60 years the government could not. The locals are happy with us. They no longer need to pay tax to the government. We have build pipelines and provided water to people. [...] Also we resolved decade-long rivalries that had been going on and which the government failed to bring about peace. The Taliban have appointed ulema to solve these cases and bring peace.'

The Swati Taliban assumes the role of a surrogate government by providing its citizen’s basic amenities--roads and water. And of course justice, which the locals feel deprived of, believing that the Pakistani government time and again ignores the developmental needs of this region. On top of this, the commander conjures a horrific picture of the Pakistani army; he pins the blame for collateral damage during warfare on the military--not only do they take innocent lives, they also steal from peoples’ homes."

5. RUSCORP SIGNS MOU WITH NIGERIAN STATE OIL COMPANY TO PROVIDE SECURITY, MAINTAIN PIPELINE NETWORK

Uchenna Izundu at the Oil & Gas Journal notes that a Russian security and maintenance company, Ruscorp, has signed a memorandum of understanding with the Nigerian National Petroleum Corp. to monitor the country's pipeline network, improve the existing pipelines as well as build new distribution lines.

6. CHÁVEZ ISSUES DECREE NATIONALIZING EQUIPMENT AND WAREHOUSING FACILITIES AT PORTS

Rainbow Nelson at Lloyd's List reports that Caracas has issued a decree effectively terminating all private concessions at the countries ports, with state-owned companies taking over all equipment and warehousing facilities. (Subscription only, but the headline is a decent datapoint.)

7. CREDIT CARD JUNK MAIL BOTTOMS

Barbara Kiviat at the Curious Capitalist notes that Synovate, a firm which tracks junk mail, has produced a chart--available at her blog--which shows that credit card offers going out underwent a sharp fall from the fourth quarter of 2007, but seem to have bottomed out in the second quarter of 2009.

8. CASH FOR CLUNKERS MOSTLY STIMULUS FOR AUTO INDUSTRY; AUTO INDUSTRY RESPONSIBLE FOR MOST OF MANUFACTURING REBOUND IN JULY; MINUS STIMULUS CONSUMER SPENDING MAY WELL HAVE SHRUNK BY 10% IN 2Q; PROBLEMATIC CONSTRUCTION LOANS LIKELY TO UNDERMINE BANK BALANCES GOING FORWARD

To answer what aim was intended by the cash for clunkers program, see Robert Rapier's R-Squared blog, which notes that the US will consume approximately 72 million gallons less gasoline annually because of the program.

"In the context of the amount of gasoline we use--140 billion or so gallons per year (a bit less now because of the recession)--this amounts to only 0.05% of our annual gas usage. Experts have suggested that making sure tires are properly inflated could save 3% on gas usage, or 60 times the amount saved by "Cash for Clunkers" if the majority of people are driving around on under-inflated tires.

So, for $1 billion invested in the program, a savings of 72 million gallons means we taxpayers paid $13.89 for each gallon of gasoline/yr saved. Readers know that I am a big fan of much higher fuel efficiency, but $13.89 to save a gallon of gasoline per year? While this benefit will be spread over several years of gasoline savings, surely we can do better than this.

Even if--as one reader suggested--those cars would have been on the road for another 10 years, you are still paying over a buck a gallon for the savings."

Which nicely dovetails with James Hamilton's post on whether there be an economic recovery in the offing, writing:

"Americans bought 995,000 light vehicles in July, a 16% increase over June and the best monthly report since August 2008. Domestically manufactured light trucks (which includes SUVs) lost market share but still achieved an 8% monthly sales gain. Sales of domestic cars, imported cars, and imported light trucks were all up more than 20% month to month.

If we'd seen these kinds of numbers in the absence of the cash for clunkers incentives, I would have viewed it as a strong suggestion that the economic recovery has begun. As is, I'm left wondering, and fundamentally not knowing, whether the auto figures signal the shift we've all been watching for, or sales stolen from September and October and delivered to July."

John Maudlin at the Big Picture quoted from David Rosenberg analysis yesterday:

"The details in today’s report left something to be desired. Consumer spending came in at -1.2% annualized, twice the decline expected by the consensus. This occurred in the face of gargantuan fiscal stimulus and leaves wondering how this critical 70% chunk of the economy is going to perform as the cash-flow boost from Uncle Sam’s generosity recedes in the second half of the year. Imagine, government transfers to the household sector exploded at a 33% annual rate, while tax payments imploded at a 33% annual rate and the best we can do is a -1.2% annualized decline in consumer spending in real terms and flat in nominal terms? What do we do for an encore? In the absence of the fiscal largesse, it is quite conceivable that consumer spending would have shrunk at a 10% annual rate last quarter! Nonresidential construction action sagged at an 8.9% annual rate and this was on top of a 44.0% detonation in the first quarter. Ditto for equipment & software ‘capex’ spending, also down at a 9.0% annual rate and this too followed a 36.0% collapse in the first quarter. Residential construction slumped sharply yet again, this time at a 29.0% annual rate. These are the guts of private sector spending and collectively, they contracted at a 3.3% annual rate--the sixth decline in a row. So while there are many calls out there for the recession’s end, it remains a forecast as opposed to a present-day reality."

And Barry Ritholtz, also at Big Picture, notes the recent Deutsche Bank report which suggests that construction loans are likely to become a larger problem for the banks over time.

"Construction loans are structured with upfront reserves--meaning that it takes much longer for [Commercial Real Estate] defaults to occur. Low short-term interest rates also means reserves can last longer--BUT, as DB notes, Once reserves are exhausted, defaults will skyrocket."

9. COMMERCIAL CRUDE STOCKS BUILD MORE THAN EXPECTED, GASOLINE PRICES RISE, REFINING UTILIZATION DOWN

The EIA reports that crude oil commercial stocks built by 1.7 million barrels to 349.5 million barrels in the week ended July 31--above the five year historical range for this time of year. A Bloomberg survey had the median expectation of analysts at a 600,000 barrel build. Gasoline stocks fell by 200,000 barrels, are at the top of the historical range, and versus analyst expectations of a 800,000 barrel draw. Distillate stocks fell by 1.1 million barrels and at 161.5 million barrels are 28.2 million larger (or 21.2% more) than the comparable stock level seen last year--well above the five historical range. Analysts had expected a 1.23 million barrel build. Refining utilization fell to 84.54% from 84.57% the previous week. The national average of regular gasoline prices rose 5.4¢ to $2.557/gallon in the week ended August 3. (People tend to start driving less at prices between $2.50-$3.00/gallon.) The report also includes a helpful explanation of why refinery outages on the Gulf Coast have a large effect upon national prices.

10. POTATOES MAY ACCOUNT FOR AS MUCH AS 22% OF POPULATION GROWTH AND 47% OF URBANIZATION IN THE 18TH AND 19TH CENTURIES

Nathan Nunn and Nancy Qian at VoxEU argue that the introduction of new world crops to the old world--and in particular the potato--is in great part responsible for the population explosion and urbanization from 1800:

"The traditional explanation for the rise in population is that medical advances, such as the understanding of the germ theory or the innovation of vaccinations, and improvements in public sanitation greatly decreased infant and child mortality, which in turn led to an increase in population (e.g. Preston, 1975, 1980, 1996; Cutler, Deaton and Lleras-Muney, 2005, 2006). However, in recent years, scholars such as Thomas McKeown (1976) and Robert Fogel (1984, 1987, 1994, 2004) have argued that the increase in population was mostly due to an improvement in nutrition rather than the advances in medicine or sanitation. McKeown argued that the decline in mortality began to occur well before the most important innovations such as antibiotics or vaccinations, which did not become prevalent until the 20th century, and therefore, there is scope for other factors to contribute to the rise in population. Fogel argued that since height is positively correlated with nutritional investment during childhood as well as lower mortality rates, then the observation that heights in America and the UK were increasing is evidence that nutrition was improving during this period.

If Fogel is right, then we have to ask what caused the improvements in nutrition. Certainly, improvements in agricultural technology are part of the story. During this time, a number of productivity-enhancing technologies were developed. Examples include the seed drill, the threshing machine, and the Rotherham swing plough.

In recent research, we argue that another main contributor was the discovery of New World food crops, namely, the potato (Nunn and Qian 2009). Potatoes are extremely nutritious and a very 'cheap' source of calories. They produced much higher yields per acre relative to pre-existing Old World staple crops. Historical survey data from England show that if a family of four were to subsist on only one crop, it would require 66% less land if it were to plant potatoes rather than staples such as barley, wheat, or oats (Young, 1771). Potatoes are also easy to store and were popular as fodder for livestock through the winter. Therefore, cultivating potatoes also indirectly improved protein intake. The diffusion of potatoes also had a tremendous impact on nutrition in the Old World because vast land areas in Northern Europe, Asia, and high altitude areas of Africa were suitable for cultivating potatoes. Figure 2 maps suitability for potato cultivation. Yellow and brown colored regions are suitable. Darker colored regions are more suitable."