With supply following demand, as with any monopolistic arena, it looks like the world crude oil balance remains very much neutral leaving the Saudis in full control as swing producer where they set prices and let quantity adjust to market demand.

Stable crude prices with 0 interest rates, high excess capacity and low aggregate demand should keep inflation at bay indefinitely, with productivity increases making deflation the greater risk.

The institutional structure puts the Eurozone in a very awkward position.

The higher deficits desired by the economy to restore non govt net financial assets at the same cause a deterioration in the credit worthiness of the member nations running the deficits, which seems to limit the process as these to two forces collide in a counterproductive, unstable and turbulent manner.

The higher member nation deficits also are a force that moves the euro lower which can continue until exports somehow resume via the foreign sector reducing its net financial euro assets as evidenced by a pickup in net euro zone exports. That process can be drawn out and problematic as well in a world where global politics is driven by export desires from all governments.

EU Headlines:

Trichet Expects Investors to ‘Recognize’ Greek Moves

Italian Consumer Prices Rose in March on Energy Costs

Europe Inflation Jumps More Than Economists Forecast

Euro Area Needs to Substantially Improve Governance, EU Says

German Unemployment Unexpectedly Declined in March

German Machine Orders Jumped 26% in February on Foreign Demand

France’s 2009 deficit hits record high 7.5 percent of GDP

The adjustments beginning April 1 could be substantial after this year’s year end adjustments in Japan added to the usual month end and quarter end global adjustments.

I’d guess this was the time for a lot of clean up adjustments in Japan from prior years due to more favorable valuations and a return of market functioning.

Today (3/31) is a fiscal year end in Japan and most of the financial institutions are happy with their results as equity is much higher than a year ago (NKY: 11,089 vs 8,109 last year) and JGB yields are almost the same level (10yr JGB: 1.40% vs 1.35% last year)