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Monday, December 22, 2014 5:03 AM


North Korea Threatens White House, Labels US a "Cesspool of Terrorism"; Sony Ponders YouTube Release of "The Interview"


North Korean leader Kim Jong-un is an incredible blowhard, but no credible threat to anyone outside North Korea. He just wants attention.

And he's going to get it following his Threat to target White House after Obama Claims North Korea Behind Sony Hacking.

President Barack Obama is “recklessly” spreading rumours of a Pyongyang-orchestrated cyberattack of Sony Pictures, North Korea says, as it warns of strikes against the White House, Pentagon and “the whole US mainland, that cesspool of terrorism”.

A long statement from the powerful National Defense Commission late Sunday underscores Pyongyang’s sensitivity at a movie whose plot focuses on the assassination of its leader Kim Jong-un.

"Our toughest counteraction will be boldly taken against the White House, the Pentagon and the whole US mainland, the cesspool of terrorism, by far surpassing the ‘symmetric counteraction’ declared by Obama," said the commission’s policy department in a statement carried by the official Korean Central News Agency.
US May Put North Korea Back on State Terror List

I never thought that I would agree with Kim Jong on anything significant, but his labeling the US a cesspool of terrorism seems an accurate description of US drone policy.

In response to his idle threats, US May Put North Korea Back on State Terror List.
The United States may classify North Korea a state sponsor of terrorism after its “cybervandalism” of Sony Pictures, President Barack Obama has said.

The president said the hack on the Hollywood studio was not an act of war but was “very costly”, and could land Pyongyang back on the administration’s terror list, a designation lifted by the Bush administration in 2008 during nuclear talks.

“We’re going to review those [issues] through a process that’s already in place,” he told CNN in an interview broadcast on Sunday. “I’ll wait to review what the findings are.”
'The Interview'

In case you are not in tune with what's happening, Sony was about to release a film called "The Interview".

The film stars Rogen and James Franco as journalists instructed to assassinate North Korean leader Kim Jong-un (played by Randall Park) after booking an interview with him.

Sony Hacked

Prior to release of the film, Sony was Hacked and threatened.
A message from the Guardians of Peace, the hacker group that breached the computer systems of Sony Pictures and warned against releasing the film, said “we want everything related to the movie, including its trailers, as well as its full version down from any website hosting them immediately.”

The hackers promised that if Sony scrubbed all traces of the comedy from the Internet — an impossible task — they would cease a campaign that has lasted almost a month and has threatened employees and their families, embarrassed executives and potentially unleashed 100 terabytes of private company data into the world.

A few hours later, President Obama added his voice to the chorus of critics, including irate Hollywood actors, who say Sony and the nation’s theater operators should not have canceled the release. “We cannot have a society in which some dictator someplace can start imposing censorship here in the United States,” he said.
Obama Says Sony Made Mistake by Pulling 'The Interview'

In a press conference, President Obama claimed Sony Made Mistake by Pulling 'The Interview'.

I agree with the president that pulling the movie is giving into the demands of fools. But it was not really Sony that pulled the plug.
Actor George Clooney, in an interview yesterday with Deadline, noted that Sony didn’t want to cancel its film, but had no choice once movie theaters started canceling screenings.

“Sony didn’t pull the movie because they were scared; they pulled the movie because all the theaters said they were not going to run it,” he said. “And they said they were not going to run it because they talked to their lawyers and those lawyers said if somebody dies in one of these, then you’re going to be responsible.”

Sony CEO Michael Lynton denied that his company had “caved” under the threat. In an interview with the Hollywood Reporter this morning, he said, “The movie theaters came to us one by one over the course of a very short time. We were very surprised by it…. At that point in time we had no alternative to not proceed with a theatrical release on the 25th of December….We have not caved. We have not given in. We have persevered.”
Who Hacked Sony?

Wired says Evidence That North Korea Hacked Sony Is Flimsy.
Attribution Is Difficult If Not Impossible

First off, we have to say that attribution in breaches is difficult. Assertions about who is behind any attack should be treated with a hefty dose of skepticism. Skilled hackers use proxy machines and false IP addresses to cover their tracks or plant false clues inside their malware to throw investigators off their trail. When hackers are identified and apprehended, it’s generally because they’ve made mistakes or because a cohort got arrested and turned informant.

Nation-state attacks often can be distinguished by their level of sophistication and modus operandi, but attribution is no less difficult. It’s easy for attackers to plant false flags that point to North Korea or another nation as the culprit. And even when an attack appears to be nation-state, it can be difficult to know if the hackers are mercenaries acting alone or with state sponsorship—some hackers work freelance and get paid by a state only when they get access to an important system or useful intelligence; others work directly for a state or military. Then there are hacktivists, who can be confused with state actors because their geopolitical interests and motives jibe with a state’s interests.
Alternate Theories

New York Magazine proposes 4 Alternate Theories while asking What If North Korea Didn’t Hack Sony?

I read the article and none of the alternate theories had any strong evidence, but neither does the North Korea theory.

China Condemns Cyber Attack

This morning, Reuters reports China condemns cyberattacks, but says no proof North Korea hacked Sony.
China said on Monday it opposed all forms of cyberattacks but there was no proof that North Korea was responsible for the hacking of Sony Pictures, as the United States has said.

North Korea has denied it was to blame and has vowed to hit back against any U.S. retaliation, threatening the White House and the Pentagon. The hackers said they were incensed by a Sony comedy about a fictional assassination of North Korean leader Kim Jong Un, which the studio has pulled.
YouTube Release

Sony's CEO says ‘we would still like the public to see this movie’.

That seems pretty obvious to me. What other reason is there to make a movie?

And given that theaters pulled the plug on the release, Sony considers YouTube a possible distributor for The Interview.

My personal viewpoint is the script sounds incredibly boring. I would not watch this thing if it was free. Then again, I do not like movies in general, so I am not the best of judges.

I am curious though, how many will want to see this thing simply because of the controversy. Regardless, I won't be in that group.

I am also curious about one more thing: How would president Obama and Congress have reacted if the script was an assassination plot on Obama instead of  Kim Jong-un?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Sunday, December 21, 2014 4:21 PM


OPEC Blames Speculators, Non-OPEC Countries, US Frackers for Oil Price Crash


OPEC is pointing the finger at speculators as well as Non-OPEC countries, but especially US shale producers for the crude price crash.

Let's explore that idea in a series of charts. But first let's take a look at the allegation.

The Wall Street Journal reports Gulf Oil Exporters Blame Non-OPEC Producers for Glut.

Gulf oil officials on Sunday defended OPEC’s decision last month to keep its production ceiling intact, blaming producers outside of the group for the glut of oil on the market that has depressed prices.

Speaking at an energy conference in Abu Dhabi, Saudi Oil Minister Ali al-Naimi blamed a lack of coordination from producers outside the Organization of the Petroleum Exporting Countries—along with speculators and misleading information—for the slump.

OPEC officials have singled out American shale producers as a particular problem. U.S. oil production has soared as a result of the shale boom, reducing OPEC exports to the U.S.

Non-OPEC producers “will realize that it is in their interests to cooperate to ensure high prices for everyone,” Mr. Naimi said.
OPEC December Monthly Oil Market Report

Are US shale frackers really to blame for the price crash?

Let's take a look using OPEC's own data. Please consider charts and other analysis from the OPEC December Monthly Oil Market Report.
OPEC vs. Non-OPEC Supply

Non-OPEC oil supply is estimated to grow by 1.72 mb/d in 2014 to average 55.95 mb/d.

In November, OPEC crude oil production averaged 30.05 mb/d, according to secondary sources, a decrease of 0.39 mb/d over one month earlier.



OECD Americas

OECD Americas’ oil production is estimated to increase by 1.54 mb/d in 2014 to average 19.67 mb/d, the highest among all non-OPEC regions, indicating an upward revision of 10 tb/d from the previous MOMR. Strong estimates for both the US and Canada constitute the main factor behind expected supply growth, while heavy declines are seen in Mexico.



US



Developing Countries



Russia



Russia’s oil supply is estimated to increase by 0.05 mb/d in 2014 to average 10.56 mb/d, an upward revision of 20 tb/d from the previous MOMR. Production reached a record 10.67 mb/d in November as per preliminary data, an upward revision of 80 tb/d in 4Q14, with current production data for October and November indicating higher-than-expected output. Russia’s production is expected to average 10.58 mb/d in 4Q14, an increase of 60 tb/d from 3Q14. Based on preliminary oil production by companies in November, not only was output not reduced, but there was an increase in volume. However, it is anticipated marginal barrel output in Russia for 2015 could decline y-o-y, given the impact of sanctions, low prices and lack of large projects expected to come online. Nevertheless, the approval of a tax overhaul by the Russian parliament, reducing crude export duty from its current 59% to 42% in January, could encourage oil producing companies in Russia to produce more.

OPEC

Total OPEC crude oil production dropped in November to average 30.05 mb/d, according to secondary sources, down by 0.39 mb/d from the previous month. Production from, Iraq increased, while crude oil output mainly in Libya, Saudi Arabia and Kuwait fell. According to secondary sources, OPEC crude oil production, not including Iraq, stood at 26.69 mb/d in November, down by 0.44 mb/d over the previous month.

OPEC Thousands of Barrels a Day



World Supply vs. OPEC Supply



Preliminary data indicates that the global oil supply decreased 0.19 mb/d in November 2014 to average 92.69 mb/d. Non-OPEC supply experienced growth of 0.20 mb/d, while OPEC crude oil production decreased by 0.39 mb/d. The share of OPEC crude oil in the global supply declined to 32.4% in November. This estimate is based on preliminary data for non-OPEC supply, estimates for OPEC NGLs and OPEC crude oil production from secondary sources.
Singling Out US and Speculators is Ridiculous

Let's dismiss the notion speculators are responsible. Speculators, don't take delivery of significant amounts of oil (if any at all) and they don't set prices, but they can swing day-to-day volatility and perhaps exaggerate trends in both directions for a while.

Ultimately this is a supply-demand issue.

US production is up by 1.45 million barrels a day since a year ago.

Total world supply is about 93 million barrels a day. The increase in US production amounts to 1.56% of global supply. Singling out the US is absurd.

There are 12 OPEC countries vs. the rest of the world. Those 12 OPEC countries represent 32.4% of global supply.

In total, there are over 200 countries that produce oil according to the US Energy Information Administration (EIA).

An EIA chart (2012 data) will help put things in better perspective.



Countries and Producers Act Independently

It should be pretty easy to spot the problem. Countries as well as oil producers in those countries act independently.

Thus, Saudi Oil Minister Ali al-Naimi's statement "Non-OPEC producers will realize that it is in their interests to cooperate to ensure high prices for everyone” is laughable.

Every country in the world wants the other countries to be the ones to cut supply. Cooperation is not going to happen. OPEC cannot even agree among its own members.

For further discussion, please see What's Behind the Plunge in Oil? Winners and Losers? Boon to Spending or Recessionary?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

4:10 AM


Europe in Wonderland


If you don't have the money, spend it anyway, says the Ukrainian government.

Of course, that's no different than the philosophy of any other country, including the US.

In this case, however, Ukraine borders on default.

Please consider Ukraine Can’t Scrimp on Military Spending as S&P Rating Cut.

Ukraine’s president, speaking a day after the nation’s junk credit rating was cut further, said next year’s budget mustn’t cut corners on military spending and should account for the possibility of an invasion.

The war made us stronger, but has crushed the economy,” Poroshenko said. “There’s one article of spending that we won’t save on and that’s security.

Ukraine is finalizing next year’s fiscal plan amid a new cease-fire in the conflict that’s ravaged its industrial heartland near Russia’s border. As its economy shrinks and reserves languish at a more than 10-year low, it’s also racing to secure more international aid to top up a $17 billion rescue. Standard & Poor’s said Dec. 19 that a default may become inevitable, downgrading Ukraine’s credit score one step to CCC-.

With official forecasts putting this year’s contraction at 7 percent, the government needs $15 billion on top of its bailout to stay afloat, according to the European Union.

The European Union and the U.S. are discussing $12 billion to $15 billion in aid to Ukraine and “there needs to be a Russian contribution to the package,” Pierre Moscovici, the 28-nation bloc’s economy commissioner, said at a Bloomberg Government event this week in Washington. A decision is needed in January, he said.
War Has Made Us Stronger

Ukraine president says "War has made us stronger".

That lie is so stupid my dead grandmother knows it from the grave. The evidence is a CCC- debt rating, a step or so above above default, with default imminent.

The story gets even stranger.

To avoid default, Ukraine needs a "Russian contribution to the package” according to Pierre Moscovici, the economic policy commissioner for the European Commission.

Amazing Irony

Europe and the US have crippling sanctions on Russia for the conflict in Ukraine, yet the EC wants Russia to bail out Ukraine while accusing Russia of invading Ukraine.

Icing on the wonderland-cake is the Russian Ruble has plunged nearly 50% this year, but Ukraine needs money from Russia to fight Russia.

Is this complete lunacy or what?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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