www.upi.com By Owain Johnson UPI Business Correspondent From the Business & Economics Desk Published 1/13/2003 1:12 PM

CARACAS, Venezuela, Jan. 13 (UPI) -- Venezuelan President Hugo Chavez has threatened to take drastic action against the private banking sector, unless the banks agree to stop observing the national general strike, which entered its 43rd day Monday.

Most banks have been opening for no more than three hours a day to show their support for the general strike, which is seeking to force the leftist president to submit to a referendum or to call new elections.

Several of the oil-rich country's largest banking groups closed entirely Thursday and Friday, although almost all returned to their limited working day Monday.

Speaking during his weekly address to the nation Sunday, Chavez warned that the banks were on a collision course with his “social revolutionary” government.

He said banks refusing to work as normal would face hefty fines and could even be taken over by the government.

"We will fine those banks that are not complying with the law and if they still refuse to comply with it, we will have to remove their directors or intervene in them," Chavez warned.

The president also announced he would be ordering Venezuela's influential armed forces to withdraw any funds they hold in Banesco, one of the banks participating in the strike.

"I can't leave soldiers' salaries, the accounts for tank maintenance, the accounts for frigate maintenance, for the navy, the accounts which pay for tires for military vehicles or for the troops' food in a bank that has assumed a stance linked to the conspiracy," Chavez said.

The loss of the military accounts will hit Banesco, Venezuela's fourth largest bank, extremely hard. Banesco President Juan Escotet confirmed in a televised interview Monday that military deposits account for around 10 percent of the bank's total deposits.

Venezuela's Banking Regulatory Authority, Sudeban, had ordered all private-sector banks to work normally -- from 8:30 a.m. until 3:30 p.m. -- but the vast majority of branches are only opening in the mornings.

The limited opening times have led to giant queues outside banks and a general shortage of cash in ATMs. The banks' support for the strike has also made business extremely difficult for those mainly small and medium-sized companies that are still trading despite the ongoing strike.

The head of Sudeban, Irving Ochoa, said he would be meeting with senior bank directors later Monday to try to reach a new agreement on quality of service, security and operations during the general strike.

Ochoa said he was hopeful the government and the banks will strike a deal acceptable to both sides later this week, despite the tough line taken by Chavez.

The financial services sector is likely to take the president's warnings seriously. The Chavez government has already showed by its treatment of state-owned energy giant PDVSA that it is not afraid to take tough measures in order to break the general strike.

The government has dismissed striking oil workers' spokespeople and has threatened to dismiss all those PDVSA employees that do not return to work. The government has begun to restart a small proportion of the company's operations using contract workers, loyal employees and technicians brought in from abroad.

PDVSA is, however, a state-owned company under government control, and it is unlikely that Chavez would actually risk intervening in the private banking system, which is largely owned by foreign companies.

Venezuela's two largest banks are both owned by Spanish groups. The Santander Group and the Banco Bilbao Vizcaya Argentaria own the Banco de Venezuela and Banco Provincial respectively. U.S. banking giant Citibank is also a major player in Venezuela.

At a time when his beleaguered government is extremely reliant on foreign support, it would be very damaging diplomatically for Chavez to intervene in banks owned by powerful foreign groups.

A more likely scenario is that the president's threats were intended to dissuade the banks from any further full-day shutdowns. It seems likely Sudeban will broker a deal between the sector and the government that will commit the banks to continue opening at least partially every day in exchange for an end to government legal proceedings against them.

It is also in the banks' interests to remain open partially, as the financial services sector has been one of the sectors worst affected by Venezuela's economic slowdown and cannot afford to lose any more business than is inevitable given the effects of the general strike.

Throughout 2002 banks suffered the lethal combination of a dramatic decrease in borrowing, a wildly fluctuating exchange rate and a lack of investor confidence in the government's ability to manage the economy.

Large numbers of investors pulled their money out of Venezuela in response to the worsening political and economic situation, which led to an estimated fall in gross domestic product of around 8 percent in 2002.

Defaults on loans have also risen sharply as the economic contraction forces many smaller companies into bankruptcy, while the prospects for 2003 remain dismal as the effects of the ongoing general strike, and in particular, the dramatic decrease in oil revenue make themselves felt.

"We should prepare for a difficult year. The enemies of the fatherland are going to continue to try to destabilize the country," Chavez warned Sunday.

abcnews.go.com

— LONDON (Reuters) - Oil prices moved back into positive territory on Monday as two oilfield closures in the North Sea renewed worries about global supply despite OPEC's weekend pact to raise output.

The Organization of the Petroleum Exporting Countries at an emergency meeting on Sunday increased production limits by 1.5 million barrels per day, seven percent, to compensate for six weeks of losses in strike-bound Venezuelan supplies.

London Brent crude broke through $30 a barrel to reach $30.05 a barrel while U.S. light crude rose 28 cents to $31.96.

Dealers said the rally was triggered by news from Norwegian state oil producer Statoil that two North Sea oilfields shut on Monday because of technical problems, cutting production by some 165,000 bpd -- a minimal amount on a global scale.

"The fact that the North Sea output problem is supporting the market really shows how tight the physical crude supply is," said Lawrence Eagles of GNI.

Fears that a U.S. assault on Iraq may be only weeks away are helping support prices that recently hit a two-year high of $33.65 for U.S. crude.

Analysts said Monday's earlier price fall had been contained because traders saw no short-term relief for crude inventories in the U.S. that are near 26-year lows.

"It's just enough for the moment but it's not going to push prices down much," said Adam Sieminski of Deutsche Bank in London of the OPEC pact.

"I certainly see (U.S.) oil staying above $30 until the Venezuelan situation is sorted out," said Paul Ashby, oil and gas analyst at ABN Amro in Sydney.

Oil from the Middle East takes four to six weeks to reach U.S. shores, while Venezuelan crude, which normally accounts for 13 percent of U.S. imports, arrives in about five days.

"There are delays in getting oil from the Middle East to the United States, plus OPEC's agreement is for 1.5 million barrels per day, but prior to the strike Venezuela production was about 2.5 million," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney.

"The global market is going to remain tight and with ongoing war fears, you've got to be pretty brave to sell oil at the moment."

SPARE CAPACITY

There are worries about how much of the extra oil OPEC can actually deliver.

The 1.5 million bpd increase was divided pro-rata among members, meaning Venezuela was also granted its share of the higher output limit despite the 43-day-old strike that has slashed its exports by 80 percent to 500,000 bpd.

Many others in OPEC have little or no spare capacity to bump up production, leaving Saudi Arabia to provide the lion's share.

The kingdom has moved quickly to implement the OPEC decision, telling Europe based majors to expect 10-20 percent more oil in February, industry sources said on Monday.

Crude traders said the hike had reversed Saudi's January's cuts, made to clamp down on quota busting.

Riyadh fears an oil price shock that would dent demand for its crude if a U.S.-led war in Iraq should come before Venezuelan supplies are restored.

Venezuela, OPEC's third-biggest producer, is fifth in world exporter rankings, while Iraq sells up to two million bpd overseas under the United Nations oil-for-food program.

Signs are that dealers are already planning to go without Baghdad's crude, cutting back on Iraqi purchases under the U.N. humanitarian exchange, in case war prevents delivery.

In recent weeks Iraqi exports have been running near full capacity but industry sources said on Friday that sales for the week had dipped by half to just 900,000 bpd.

OPEC President Abdullah al-Attiyah said on Sunday ministers would meet again if Venezuela restores full production. The group's next scheduled gathering is for March 11.

OPEC's agreement brings the cartel's official production ceiling for its 10 members bound by quotas to 24.5 million bpd.

english.pravda.ru 19:35 2003-01-13

Saudi Arabia denied the leadership among oil exporting countries for the third time already

Despite the efforts taken to save appearances, OPEC seems to have lost its control over the world’s oil markets (the control is lost for a while, but still). In the end of the previous year, responsible OPEC representatives told that there was enough hydrocarbon stuff, that prices were within the limits determined by OPEC itself and that all problems were just temporary. However, the situation proved to be different in fact. The continuous strike in Venezuela paralyzed one of the most active OPEC members. And the oil prices exceeded the fixed limits. Moreover, the disputes concerning leadership inside the oil cartel have even aggravated. A crisis was brewing for a long period already until it broke out at the 123rd OPEC conference in Vienna.

Mass media accredited at the OPEC headquarters in Vienna report, many ministers protested against a complete gathering of all OPEC members. The recently held 122nd OPEC conference decided to increase oil quotas up to 23 million barrel per day starting with January 1. Even new president of the OPEC conference, Qatar’s Minister of Energy and Industry, Abdullah Bin Hamad Al-Attiyah, known for his extremely cautious and weighted tactics, offered to discuss the problem of changing the oil production quotas and export oil supplies in a telephone conversation. However, as Russia’s news agency RIA Novosti thinks, the OPEC general secretariat decided to summon an extraordinary OPEC conference on January 12, which is said to be done on the advice of Venezuela’s former oil minister, incumbent OPEC secretary general, Alvaro Silva Calderon.

As could be expected, the conference failed to take place. For this or that reason, almost half of the oil ministers from 11 OPEC member countries couldn’t come to Vienna (probably they just didn’t want to). And as all decisions in the oil cartel are taken unanimously, it was immediately decided to transform the conference into an informal meeting of especially anxious oil ministers. However, even in this reduced format, the meeting looked very much like a football match. Finally, Saudi Arabia openly spoke about its particular role in the oil world.

As RIA Novosti states, until recently Saudi Arabia couldn’t be considered an unconditional OPEC leader because of Venezuela’s too active position and because of Venezuela President Hugo Chavez’ personal position. He actively interfered into the affairs of the oil cartel and his aggressive position was supported by another OPEC member, Iran and Iranian President Mohammad Khatami, who in his turn feared that the Saudi Royal Family might get stronger.

As it happened in fact, the Venezuela president is currently more anxious about domestic affairs, not some world-scale ambitions. A nation-wide strike instigated by workers of Latin America’s largest oil and gas monopoly, Petroleos de Venezuela, continues for 1.5 months already. Within this short period of time, Venezuela has turned from the world’s largest oil exporter into the largest oil importer. Not to mention its ambitions concerning OPEC.

Saudi Arabia Minister of Oil Al-Naimi has taken the bull by the horns: he said that as far as Venezuela fails to meet its oil commitments, generous and long-sighted Saudi monarchy would save the situation. And if so, the quotas shouldn’t be raised. It was emphasized that Saudi Arabia would easily compensate for the absence of Venezuela in the oil cartel. However, the Saudi minister of oil went further and declared that the country would supply not 10, but 15 million barrel of oil to the international markets daily. The amount was said to be enough to cover all possible deficits of oil in the world.

But for one snag, the Saudi suggestion could have been actively supported in OPEC. If the suggestion were adopted, it would be perfectly obvious who were the master of the situation. What is more, it would be openly declared that OPEC was a dummy. We would like to mention that American officials declared several times already that OPEC was outdated, and the situation would be even much better without the organization. At the same time, the USA started strictly criticizing Saudi Arabia, and it also declared “a new format” of energy cooperation with Russia (the cooperation that seems to have faded away during the Houston summit already). After that, Russia paid significant attention to China that urgently needed oil; as soon as Russia evinced its interest toward China, Japan and South Korea immediately rushed to talk it out of the intention to supply oil to China.

Even the most short-sighted OPEC members understood that the oil cartel would fall to pieces if the role of Saudi Arabia strengthened. The suggestions submitted by Al-Naimi were rejected, and the format of the conference was transformed into an informal meeting. As a result, OPEC will once again increase oil production quotas by 1.5 million barrel per day starting with February 1. However, experts say that even this increase won’t compensate the absence of Venezuelan oil on the markets. That is why all words concerning avoidance of a global energy crisis and about stabilization on the world market still remain only the words. OPEC all the same continues its favorite dangerous game: it teases stagnating economies of the Western countries with sickly dependence upon suppliers of raw stuff. At that it’s perfectly clear that humiliated Saudi Arabia benefits from this situation. Because under these conditions it won’t be stopped with any punitive discipline and will compensate the oil shortage in the world without prior arrangements.

It is quite clear that if the struggle for resources has reached such tension, the largest oil supplier will fight not for ordinary markets, but for new ones. And this is likely to be a success. At least, Russia experiencing an acute crisis of its fuel and energy complex won’t be able to hamper this expansion.

Under such conditions it makes no difference any longer if the situation in Venezuela improves rather soon. Iran, Venezuela together with the United Arab Emirates or Kuwait will once again re-establish the domination of “the weak” over OPEC and regain their profits from control over the oil markets. The strong OPEC members seem to have decided that the oil cartel is a useless anachronism that must be put an end to. And if the supposed scenario of the situation in Iraq (overthrowing of Saddam Hussein, splitting of Iraq into several sovereign states, withdrawal from OPEC, etc.) is put into practice, the influence of the oil cartel will be so insignificant that nobody will strive for the leadership in the organization.

Dmitry Slobodanuk PRAVDA.Ru Translated by Maria Gousseva Read the original in Russian: economics.pravda.ru

www.boston.com By Associated Press, 1/13/2003 12:44

CARACAS, Venezuela (AP) The Venezuelan Winter League canceled the rest of its season Monday because it can't guarantee security, supplies and media coverage during an anti-government strike.

The league is consulting with the organizers of the annual Caribbean Series, to be played in Puerto Rico next month, to determine if Venezuela can participate. Several players have expressed interest in forming a Venezuelan team.

Play was suspended Dec. 9, a week into the strike. Several American and Venezuelan players left for the United States after travel warnings issued by the U.S. State Department.

The strike has cost the league at least $4 million.

www.stockhouse.ca Upward Trend in 2003, Says BMO Financial Group Economic Report 1/13/03 TORONTO, Jan 13, 2003 (Canada NewsWire via COMTEX) --

A steep rise in energy prices and brisk gains for metals and forest products boosted BMO Financial Group's Commodity Price Index in December. BMO's composite index of nineteen commodities important to the Canadian economy rose 5.1 per cent to 117.9 (1993 equals 100) from 112.2 in November.

"Although weak economic conditions in North America during the past two years reduced most commodity prices to well below their recent highs in 2000, the corner has now been turned," said Earl Sweet, Assistant Chief Economist, BMO Financial Group.

"The combination of generally good supply management and a strengthening North American economy should stimulate further gains in the index over the course of 2003," said Sweet. "Commodity prices were generally volatile in 2002, but the BMO Price Index ended the year 20.6 per cent higher than in December 2001."

Much of the rise in BMO Financial Group's Commodity Price Index over the twelve months of 2002 stemmed from sharp increases in its Oil & Gas Index. Spurred by supply concerns - geopolitical in the case of oil and dwindling reserves in conventional North American basins in the case of natural gas - the energy sub-index shot up 5.1 per cent in December to a level more than 62 per cent higher than a year earlier.

The BMO economic report sees the price of the US benchmark West Texas Intermediate as averaging US$25.50/barrel in 2003, although the intra-year range could be as wide as US$15-45/barrel.

"Given the current volatile situations in Venezuela and Iraq and the potential supply responses by the rest of OPEC and Russia, there is huge uncertainty as to the future course of oil prices," said Sweet.

Natural gas prices in western Canada are expected to average US$3.50/mmbtu, up very sharply from US$2.63 in 2002. By December, natural gas prices in western Canada had risen to an average of US$3.97/mmbtu, while the US benchmark Henry Hub traded at US$4.65.

"As high prices in 2002 did not stimulate increased drilling activity, prices will have to rise even further in 2003 to "price out" some demand and improve the economics of imported liquefied natural gas into the US market," said Sweet.

Prices of Metals & Minerals rose 1.1 per cent in December, sustaining a bumpy upward trend that raised the sub-index 8.3 per cent above its year- earlier level. Over the course of the year, nickel prices recorded the strongest advance, climbing 34 per cent as the demand for stainless steel improved and supplies became tight. The next largest price increase for metals accrued to gold, which rose 21 per cent over the twelve months of 2002. Gains for copper, zinc, and aluminum were more restrained, held back by still-large inventories.

"We expect that a strengthening in global industrial production will further lift the sub-index for metal prices. Once again, tight supplies for nickel are likely to sustain its position as the leader in terms of price gains," said Sweet. "Copper should do well as the economy strengthens, while lead, zinc, and aluminum are expected to struggle under the weight of heavy inventories and, in the case of aluminum, soft demand from manufacturers of ground and air transport equipment."

Pricing conditions in 2002 will be remembered as among the most difficult that forest products producers ever faced. Prices of all products but one (oriented strandboard) comprising the Forest Products Index fell in the year - some substantially. Moreover, the majority fell to levels unseen in about a decade. As a result, the Forest Products Index tumbled 12.5 per cent (on an annual average basis), its second steepest decline on record since 1965.

In December, an upturn in lumber prices from particularly depressed levels pulled the Forest Products Index up 1.8 per cent, which is only the second increase in the past nine months.

"For many of the Forestry group's commodities, near-term prospects are likely to continue to be restrained by excess supply," said Sweet. "Nonetheless, prices in the sector should benefit gradually from the strengthening of North American economic activity and its favourable impact on demand later in 2003."

Sweet noted that "consolidation among lumber producers is likely to contribute to higher average lumber prices in 2003, although the trade dispute between Canada and the United States will remain a source of uncertainty".

Weak global demand and excessive inventories will likely inhibit any near-term improvement in pulp prices. However, starting later this year, growing demand and greater supply discipline should help prices shake off their lethargy.

Similarly, resumption of the newsprint price recovery will await clearer signs of stronger consumption by end-users. Once demand picks up - likely before mid-year - the impact on prices should be fairly quick given that newsprint inventories are well contained.

The Agricultural Index's weak result in December (down 8 per cent) belies its strength during the rest of the year. Over the twelve months through December, the Agricultural Index jumped 24.5 per cent as poor growing conditions for grains and oilseeds in major exporting countries such as Canada, the United States, and Australia lead to a substantial tightening of global supplies. Wheat prices soared 26 per cent, from US$3.57/bushel in December 2001, to US$4.49 a year later. Canola and soybean prices also recorded sharp gains, climbing 25 per cent and 30 per cent, respectively, over the twelve months of 2002. The BMO Report anticipates that low global inventories of grains relative to consumption and signs that major exporters may be prepared to reduce or restructure farm support suggest further increases in grain prices. BMO Financial Group's sub-index for Agriculture is expected to rise a further 10 per cent during the next 12 months.

     BMO Financial Group Commodity Price Index for December 2002

                      ---------------------------------------------------
                       Dec. 2002 Level   Per cent change  Per cent change
                      (1993 equals 100)  from month ago   from year ago
-------------------------------------------------------------------------
All Commodities               117.9            5.1              20.6
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Oil & Gas                     188.6           12.8              62.2
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Metals & Minerals             105.3            1.1               8.3
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Forest Products                85.9            1.8              -5.1
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Agriculture                   101.4           -8.0              24.5
-------------------------------------------------------------------------

The full BMO Financial Group December Commodity Price Index and Report is available on the bank's website at www.bmo.com.

Internet: www.bmo.com

VIEW ADDITIONAL COMPANY-SPECIFIC INFORMATION: www.newswire.ca

For further information: Michael Edmonds, Toronto, (416) 867-3996; Ron Monet, Montreal, (514) 877-1101; Laurie Grant, Vancouver, (604) 665-7596

News release via Canada NewsWire, Toronto 416-863-9350