Oil Markets:

Aljazeera TV quotes OPEC officials that members have agreed to cut production by 1 million barrels a day to counter recent price declines. It is not clear if the cut will be in the official quotas, which is meaningless unless the total production including the extra (cheating) production is reduced. Still, crude prices jumped up for the day in the markets.
 
Both sides, producers and consumers, have ratcheted up their price expectations and their accepted price level in the past year. Producers used to talk of a reasonable price of $ 25-30 a little over one year ago (e.g. Saudi Oil Minister), but now they try to defend $60 a barrel. Consumers fumed when prices topped $ 40 some time back, but at the same time were making themselves psychologically ready to accept even higher prices by warning of prices above $ 80.

Now $ 60/ bbl looks reasonable to consumers. Some analysts still talk of $ 35 a barrel, perhaps some of them have shorted crude oil, but that can happen only if there is a severe worldwide recession, an unlikely event in this age. I know, we were taught in graduate school that anything can happen in economics: all we need is the right set of assumptions. A severe recession, even a depression, can happen with the wrong policies. But it is becoming ever harder to follow the wrong economic policies in a sustained way, not with all the policy oversight in the major industrial economies, especially the United States. Or it can happen if there are huge new finds or huge upward revisions of existing reserves. This can happen as well, but there is a long time between finding new reserves and delivering them to the markets.

I would not hold my breath waiting for crude prices below $ 50, but I can see prices back over $ 70 and more.

Third World Nukes:
North Korea has tested a nuclear weapon, according to reports today. The Dear- Leader, chubby, pot-bellied, inheritor of the land and people of North Korea, one of two remaining cornerstones of the famed Axis of Evil, just got evil-er. Or perhaps it is the old strong men around him. This could mean interesting moves along the Iranian weapons front as well. If the West (mainly the US) turns a blind eye at Kim Jong Il's move, then the hairy mullahs in Tehran can breathe easier. One can't turn a blind eye to Pyongyang and at the same time glare threateningly at Tehran for the same act. On the other hand, in the unlikely event that harsh measures are voted against North Korea at the UN, this would indicate serious measures are in the cards against Iran- that means serious sanctions. This in turn might complicate the situation in Iraq and within Lebanon.
Along these lines, the son of Egypt's President Mubarak, perhaps attempting to enhance his credentials to take over from his father, has hinted in a speech at a future Egyptian nuclear program. I think not, though- the U.S. Congress will have a lot to say about that, at least once a year, something it cannot do effectively with Iran and North Korea. 

 Cheers
Mohammed