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from Global Investing:

The missing barrels of oil

Where are the missing barrels of oil, asks Barclays Capital.

Oil inventories in the United States rose sharply last week, with demand for oil products  such as gasoline at the lowest in 15 years and crude stockpiles at the highest since last September. Americans, pinched in the wallet, are clearly cutting back on fuel use.

But worldwide, the inventories picture is different -- Barclays calculates in  fact that oil stocks are around 50 million barrels below the seasonal average. And sustainable spare capacity in the market is less than 2 million barrels per day. What that means is that the world has "extremely limited buffers to absorb any one of the series of potential geopolitical mishaps." (Barclays writes)

A big difference from the picture at the start of 2012. With the global economy weak, analysts predicted OPEC would need to pump 29.7 million barrels per day in the first quarter, more than a million barrels below what the group was actually pumping. Logic dictates inventories would have started to build.

But since then conflict in Syria, Sudan and Yemen has removed a combined 1.2 million barrels per day of non-OPEC crude, Barclays says. There have been some problems with North Sea output.

from Global Investing:

Interest rates in emerging markets – - harder to cut

Emerging market central banks and economic data are sending a message -- interest rates will stay on hold for now.  There are exceptions of course.

Indonesia cut rates on Thursday but the move was unexpected and possibly the last for some time. Brazil has also signalled that rate cuts will continue.  But South Korea and Poland held rates steady this week and made hawkish noises. Peru and Chile will probably do the same.

from Breakingviews:

Korean spending spree sets right tone

By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

South Korea’s spending spree looks wise. The government plans to spend 70 percent of its budget in the first half of 2012, and will likely throw in an additional Keynesian deficit-spending package. With presidential elections in December, that might seem a sop to voters. But Korea can afford it. And it has so far resisted the less sensible course of weakening the won to boost exports. The rest of Asia should follow its lead.

from Breakingviews:

China could be North Korea’s ally of last resort

By Wayne Arnold
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Conventional thinking has it that South Korea will one day absorb its impoverished cousin. But if the North collapses, it could be Beijing that has more interest in propping it back up. Like bailing out a bank, doing so would require China to inject liquidity and capital in return for more accountable management in Pyongyang.

from Ian Bremmer:

Fallout is just beginning in North Korea

By Ian Bremmer
The opinions expressed are his own.

There are many surprising things about Kim Jong-il’s sudden death, not the least of which is that it took two days for the rest of the world to hear about it. Yet most surprising is the sanguine reaction of the global and especially the Asian markets. On Monday, or actually Sunday as we now know, the world woke up to its first leaderless nuclear power. Coming as close as anyone could to filling his seat was his youngest son, who is in his late twenties. There’s no way these facts were accurately priced into markets that took just a relatively minor dip as a first response. The news from North Korea appears to have been taken far too lightly, and just a few days out, it’s disappearing from the front pages.

While Kim Jong-un’s status as heir apparent seems to tie a nice bow around the situation, let’s get real for a moment. The son of the elder Kim only appeared on the North Korean stage after a stroke necessitated succession planning in Kim Jong-il’s regime in 2008. Consider that founder of the country Kim Il-sung put his son, Kim Jong-il, in front of the citizenry as his heir for more than a decade before his 1994 death. That decade was precious time; time Kim Jong-il spent consolidating power and putting his own people into high government office— and he was over 50 years old when his father passed away. Kim Jong-un has been deprived of that head start; he’s got to rely on whatever ground his dead father managed to clear for him since his 2008 stroke. A couple of years at his father’s side -- and a promotion to four star general -- is scant time for the younger Kim to have developed a real plan for ruling, or real allies in government.

from Breakingviews:

Dear Leader’s death may prize open hermit state

By John Foley (The author is a Reuters Breakingviews columnist. The opinions expressed are his own)

The greatest achievement of Kim Jong-il was to keep North Korea cut off as the rest of the world joined up. The Dear Leader, who died on Dec. 17 according to state media, didn't manage it perfectly - the "hermit state" imports energy and food from China, and until lately the odd bottle of French cognac. But North Korea's quest for self-sufficiency has left the people in ignorance of the modern world and created grinding economic hardship. Kim's successor, likely his youngest son Jung-un, will struggle to lift that heavy burden.

from Photographers' Blog:

The truce village of Panmunjom

By Lee Jae-won

South Korea is surrounded by the sea on all sides but one. The country is virtually an island as it is bordered to the north by reclusive North Korea.

There is only one place, called a truce village, where South Koreans and visitors can see the border and soldiers from the secretive state.

from Global Investing:

Japan fires latest FX wars salvo; other Asians to follow

Emerging central banks that sold billions of dollars over the summer in defence of their currencies might soon be forced to do the opposite. Japan's massive currency intervention on Monday knocked the yen substantially lower not only versus the dollar but also against other Asian currencies.  The action is unlikely to sit well with other central banks struggling to boost economic growth and raises  the prospect of a fresh round of tit-for-tat currency depreciations. Already on Monday, central banks from South Korea and Singapore were suspected of wading into currency markets to buy dollars and push down their currencies which have recovered strongly from September's selloff.  The won for instance is up 6.9 percent in October against the dollar -- its biggest monthly gain since April 2009.  The Singapore dollar is up 4.5 percent, the result of a huge improvement in risk appetite.

Despite the interventions, the yen ended the session more than 2 percent lower against both the won and the Singapore dollar,  and most analysts reckon Japan's latest intervention is by no means its last. That's bad news for companies that compete with Japan on export markets and will keep neighbouring central banks watching for the BOJ's next move. "Asian central banks are likely to play in the same game, and keep currencies competitive via regular interventions," BNP Paribas analysts said.

from Oddly Enough Blog:

Catching bayonets, what could go wrong?

It's not that I don't think you know what you're doing, but we hired you to spiff up our military honor guard with some great new moves, and I'm just not sure about your plan.

Trust me, I know what I'm doing.

Okay, I'm sorry, what was your name again?

Lamar.

Okay Lamar, so as I understand it, the honor guard marches up, stops, and everybody just hurls their rifles straight into the air, is that it?

from MacroScope:

The thin line between love and hate

The opinion on Turkey’s unorthodox monetary policy mix is turning as rapidly as global growth forecasts are being revised down.

Earlier this month, its central bank was the object of much finger-wagging after it defied market fears over an overheating economy by cutting its policy rate. It defended the move, arguing that weaker global demand posed a greater risk than inflationary pressures.

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