Daily Sources 9/24

1. Joshua Partlow at the Washington Post has an interesting analysis of the Castro-Bush tango over hurricane relief. Evidently, the Cuban American National Foundation, the main pillar of support for the embargo in the US has mellowed some, now actively campaigning against the travel and remittance restrictions to the island. There is no mention in the story of a counter-proposal by Cuba where the US would relax the embargo so that Havana might purchase construction materials on credit. A reader caught the strange dissonance in the story where 500,000 homes were reportedly destroyed, but just 200,000 have been left homeless. Surely the embargo is counterproductive in the extreme, but to be criticized for it by the Cuban-American community via El Nuevo Herald is just a tad unreal.

2. The EIA's Week in Petroleum reports that crude stocks fell in the week ended September 19th, by 1.5 mb versus expectations of a 1.6 mb increase. The draw is definitely counter intuitive given the number of refineries shut down in response to the hurricanes. Gasoline stocks fell by 5.9 mb, which is more than the 5.1 mb that analysts expected, but still well below the 8.5 mb draw that a DOE official warned of last week. "At 179 million barrels, total motor gasoline inventories stand at the lowest level since 1967, based on monthly EIA data. Continuing reports of spot shortages of gasoline at some retail outlets where supplies have been most disrupted can be expected over the next several weeks

Mother Jones' Blue Marble Blog has the story of shortages in the Asheville, NC area. The EIA report states that about 890 kb/d of US production is still shut in from the hurricanes. So far in 2008, US crude oil production has averaged about 5.1 mb/d, so 890 kb/d is about 17% of US total production. The federal petroleum district which includes Texas and Louisiana has so far this year produced about 2.9 mb/d, so 890 kb/d is about 31% of the region's production. The EIA reports that 1.7 mb/d of refining capacity is still shut in by the storms. Total US operable refining capacity stands at about 17.6 mb/d, so that represents about 10% of US operable capacity. Contrary to predictions, gasoline prices have fallen in all regions across the US, by an average of $0.11/gallon. This might indicate lower demand.

3. Nouriel Roubini argues in the Financial Times that the next stage of the financial crisis is a run on the hedge funds. He thinks that a severe US recession is in the works and that it will spread to all the developed economies on the back of an expensive Euro, the European housing bubble, falling US imports, high oil prices, and a hawkish European Central Bank. Yikes.

4. Keith Bradsher and Heather Timmons at the New York Times report that small depositors have begun a run on the Bank of East Asia Wednesday. It is the third largest bank in Hong Kong, with assets of $51 billion.

5. The AAP has the story that BHP Billington is planning to be a long-term supplier of uranium to China. Not exactly surprising considering BHP's bid for Rio Tinto and the number of nuclear plants proposed and under construction in China. Still, it is interesting given the Australian parliament's recent investigation into proposed supply contracts with Russia.

6. Christopher Bodeen of the Associated Press reported on Chavez's visit to China where he was due to meet Hu Jintao Wednesday (China is past the international date line). In televised remarks in Venezuela, Chavez said exports to China will increase to 500 kb/d next year and that they are planned to go to 1 mb/d by 2012. This has been the rhetoric for some time now, but those numbers are very unlikely to be reached any time soon.

7. Reuters has the story that Petrologistics forecasts that OPEC production in September will fall 33.4 mb/d to 32.6 mb/d. Saudi Arabia is predicted to cut its supply from 9.7 mb/d to 9.55 mb/d. Iran is predicted to produce 4.05 mb/d, down from 4.4 mb/d.

8. The Associated Press reported Sunday that Iraqi oil exports declined to 1.75 mb/d in August, a 4% decline from the month previous.

9. A UCLA study of satellite imagery suggests that the surge was not responsible for the reduction in violence in Iraq, but rather that it was due to a correlation with the final stages of successful ethnic cleansing by various sectarian groups in Baghdad.

"If the surge had truly 'worked,' we would expect to see a steady increase in night-light output over time, as electrical infrastructure continued to be repaired and restored, with little discrimination across neighborhoods," said co-author Thomas Gillespie, an associate professor of geography at UCLA. "Instead, we found that the night-light signature diminished only in certain neighborhoods, and the pattern appears to be associated with ethno-sectarian violence and neighborhood ethnic cleansing."

10. From Platt's Quote of the Day:

"The business model has to change or we will be non-existent in the future. Collaboration is critical." Independent oil companies need to change their business models and increasingly collaborate with national oil companies, ConocoPhillips Senior Vice President of Technology Stephen Brand said Tuesday at the IHS Herold Pacesetters Energy Conference.

11. Elaine Sciolino at the New York Times reports that the IEAE has announced that North Korea has barred their inspectors from a nuclear reprocessing plant that produces weapons-grade plutonium. Pretty vigorous action given reports of Kim Jong-Il's being on his deathbed recently.

12. Jesse's Cafe Americain may have discovered the historical basis of Ben Bernanke's thinking in terms of the bailout. In 1929, many of the leading Wall Street bankers met to find a solution to the market situation. They pooled their resources and bid for various blue chips at prices well above market. Apparently, this bid to shore up the market worked in 1907 during a "liquidity panic." As we all know the 1929 intervention did not work, which would make this an odd historical precedent to attempt to repeat. Interesting nonetheless ...