Two ducks circling southern lake in city (4)
I believe the answer is:
oslo
'city' is the definition.
(Norwegian city)
'two ducks circling southern lake' is the wordplay.
'two ducks' becomes 'oo'.
'circling' is an insertion indicator (circling can mean going around or containing).
'southern' becomes 's' (abbreviation).
'lake' becomes 'L' (geographical abbreviation).
's'+'l'='sl'
'oo' going around 'sl' is 'OSLO'.
'in' is the link.
(Other definitions for oslo that I've seen before include "Norwegian chief port" , "City in Norway" , "Nordic capital" , "Norwegian city, formerly Kristiania" , "European capital in go-slow" .)