cbs.marketwatch.com By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:43 PM ET Jan. 27, 2003

NEW YORK (CBS.MW) -- Crude futures slipped back under $33 a barrel and gold prices closed off their high of $373 an ounce Monday after a much-anticipated report by the U.N.'s chief arms inspector on Iraqi weapons failed to shed light on the next U.S. move.

"The concern that the U.S. will invade Iraq is now becoming less clear as Hans Blix did not produce the "decisive" evidence that the world wanted to see of Iraq's weapons of mass destruction," said John Person, head financial analyst at Infinity Brokerage Services.

On the New York Mercantile Exchange, the March crude futures contract closed at $32.29 a barrel, down 99 cents. The contract fell to a low at $32.20.

February gold ended the session at $369.40, up $1 an ounce on Nymex, after trading earlier at $373. See Metals Stocks.

Iraq hasn't yet accepted a U.N. demand that it forsake weapons of mass destruction, but is cooperating "on the whole" with weapons inspectors, Blix told the Security Council Monday.

Blix said more work is needed to verify Iraqi compliance. He pointed out that many questions remain, including those regarding Iraq's development of missiles, and chemical and biological weapons. See full story.

Crude futures gained more than $1 Friday ahead of the U.N. Security Council meeting, but BridgetonGlobal.com head analyst Jeff Mokychic noted that "once the report came without any surprises, traders were able to scale back on their position."

Overall, Blix's testimony was "mixed at best," said Charles Nedoss, a gold analyst at Peak Trading Group. "There was no smoking gun, but there was compelling evidence that Iraq hasn't been fully forthright and has breached the U.N. agreement."

Todd Hultman, president of Dailyfutures.com said the U.S. and U.K. would likely "seize upon" Blix's comments that Iraq hasn't accepted the disarmament process to "strike Iraq."

"Other members of the Security Council are not swayed, but as [U.S.] Secretary General [Colin] Powell said this weekend, the U.S. is prepared to attack without the consent of the other members," Hultman said.

Also Monday, John Negroponte, U.S. ambassador to the U.N., called Iraq's 12,000-page report, which was submitted in December, "inaccurate." Negroponte said Iraq is "not cooperating unconditionally."

Jeremy Greenstock, British Ambassador to the U.N., said the situation wouldn't be resolved peacefully under the U.N. resolution unless the U.N. gets 100 percent cooperation from Iraq. The U.S.'s Powell echoed Greenstock's comments Monday afternoon.

President George Bush "takes his case to the American people" Tuesday in his State of the Union Address, and "military action is likely to commence sometime in February," said Hultman.

Despite the latest decline in oil futures, prices "will continue to trade on the defensive as immediate supplies will be hard pressed to replenish from Middle East outflows and more importantly the 'cat and mouse' game with Iraq will continue," said Person.

The outcome of the situation in Iraq remains uncertain, and world oil supplies are still "vulnerable," Person said.

Venezuela still in backseat

In other news Monday, Venezuela's oil strike entered its ninth week with OPEC Secretary General Alvaro Silva indicating the cartel is doing all it can to make up for the oil supplies lost in the strike.

"For the oil markets, a definitive end of the strike does not mean an immediate return to pre-strike output levels," analysts at Fimat USA told clients Monday. "It may take 30 to 45 days to get back to the 1.5 million barrel per day mark, with 45 to 60 days necessary to elevate production by an additional 1 million barrels per day."

The latest report on U.S. supplies failed to reveal much of an effect from the loss of production, however.

Early Thursday, the American Petroleum Institute reported that crude stocks rose by 181,000 barrels to total 272.4 million barrels in the week ended Jan. 17, up from 272.2 million a week earlier.

Last week, the Energy Department reported that inventories of crude climbed 1.5 million barrels to 273.8 million barrels as of the week ended Jan. 17, up from 272.3 million a week earlier. See full story. An update on supplies is due Wednesday morning.

Petroleum-product prices closed lower to follow crude. February unleaded gasoline fell by 2.1 cents to 90.15 cents a gallon. February heating oil closed at 93.43 cents a gallon, down 1.59 cents.

Natural-gas futures closed down 12.8 cents at $5.396 per million British thermal units with the latest six- to 10-day forecasts calling for above-normal temperatures in the Northeast through New Mexico and on the West Coast, according to Fimat.

Over in the equities arena Monday, the losses in crude pressured most oil service stocks, and took the Oil Service Index ($OSX: news, chart, profile) down 4.9 percent. See Energy Stocks.

Sugar, cocoa futures sweeten

Sugar futures jumped more than 5 percent, as high crude-oil prices are expected to increase the demand for ethanol production, said Dailyfutures.com's Hultman.

"With the March sugar contract trading over a cent above the July contract, it is fair to say that the markets are viewing this tightness in supply as a temporary problem," he added.

March sugar added 0.41 cent to stand at 8.38 cents a pound after touching a high at 8.53 cents.

Cocoa futures also moved higher on continued unrest in Africa's Ivory Coast, a major cocoa-producing region. March cocoa added $63 to $2,250 per metric ton.

The Reuters/CRB Index, a broad-based measure of the commodity futures market, closed at 243.3, down 0.4 percent amid losses in crude futures.

Myra P. Saefong is a reporter for CBS.MarketWatch.com in San Francisco.

www.whnt19.com

Caracas, Venezuela-AP -- Venezuelan President Hugo Chavez (OO'-goh CHAH'-vez) is promising price controls and other measures.

He's trying to hold off an economic tailspin caused by an opposition strike now in its ninth week.

He's already imposed limits on trade in foreign currencies.

Hundreds of thousands of his foes occupied a central Caracas highway for the entire weekend to protest a Supreme Court decision suspending a referendum next month on Chavez's rule.

Opposition leaders say instead of the referendum, they will collect signatures next month petitioning for Chavez to quit.

The strike called by a coalition of business, labor and political groups has crippled oil production in the world's fifth-largest petroleum exporter.

Although the referendum wouldn't have been binding, opponents had hoped a negative outcome would have embarrassed Chavez into quitting.

www.forbes.com Reuters, 01.27.03, 7:20 AM ET (Fixes typographical error in author credit line at end of story)

PORTO ALEGRE, Brazil, Jan 26 (Reuters) - Venezuelan President Hugo Chavez on Sunday said his government would present a bill in two weeks to tax financial market transactions, raising more uncertainties for investors as the country suffers under an 8-week-long strike.

Only last Wednesday, Venezuela, the world's fifth-biggest oil exporter, closed its currency market for five trading days after vital oil output was hit by the work stoppages that aim to force Chavez to resign and make way for elections.

"We are in favor of this proposal and it is very probable that a law in Venezuela establishes a tax on financial transactions in the short term," Chavez told reporters. "The government will present parliament with a law (bill) to discuss in two weeks time."

Later, he suggested other measures might follow.

"We have decided to put in place currency controls to protect the international reserves... so as not to threaten the population, there must also be price controls," Chavez said.

Hundreds of rowdy flag-waving supporters cheered Chavez's at a demonstration of support at the six-day World Social Forum being held in Brazil's southern city of Porto Alegre. The WSF is a meeting of leftist intellectuals and social groups designed to counter the conference of national and business leaders at the World Economic Forum in Switzerland.

The bill to tax financial transactions was apparently inspired by the so-called Tobin Tax on foreign exchange transactions, named after Nobel Prize-winning U.S. economist James Tobin who first floated the idea in the 1970s.

"We are currently protecting our international reserves from speculative attacks," Chavez told reporters earlier. "We are studying a tax like the Tobin one for financial transactions."

The Tobin Tax has been championed by some social groups as a way of reducing damaging currency speculation and raising funds for developing countries, but it has been largely rejected by finance ministers and central bankers in Europe.

www.forbes.com Reuters, 01.27.03, 5:45 AM ET

In the LONDON story headlined "Oil edges higher ahead of Blix report" in the third paragraph please read ...1530 GMT (1030 local time)... and not ...1030 GMT (1030 local time)... (corrects time). A corrected repetition follows.

LONDON, Jan 27 (Reuters) - Strong oil prices held ground on Monday, awaiting a report from U.N. weapons inspectors for clues to the likelihood of war in Iraq.

U.S. light crude rose two cents to $33.30 a barrel, extending Friday's gains of more than $1 in New York. London Brent added 13 cents to $30.62 a barrel.

Chief U.N. weapons inspector Hans Blix at 1530 GMT (1030 local time) on Monday will deliver his first full report to the U.N. Security Council on Iraq's 12,000-page weapons declaration and Baghdad's cooperation with arms inspectors.

Blix said he would report that Baghdad has not submitted a full account and is also expected to say that it has hampered interviews with Iraqi scientists and blocked the use of U-2 surveillance flights over all parts of Iraq.

Blix told reporters that when questions arise about anthrax, the deadly VX nerve gas or Scud missiles, the Iraqis "simply say there is nothing left of this, and there is no evidence that we can view, there are no more documents."

U.S. President George W. Bush will make a State of Union address on Tuesday and is due to meet key ally Britain's Prime Minister Tony Blair later this week. Britain has sent thousands of troops to join a U.S. military build-up in the Gulf.

"Each of these stages will provide further clarity and we can expect a timetable to war to become a little clearer," said Sydney-based independent oil analyst Simon Games-Thomas.

Washington has made it clear it is ready to attack Iraq alone if needed.

U.S. secretary of State Colin Powell said at the weekend that time was running out for Baghdad to disarm voluntarily.

"We will not shrink from war if that is the only way to rid Iraq of its weapons of mass destruction," Powell said at the World Economic Forum (WEF) in Davos, Switzerland.

SAUDI SAYS NO SHORTAGE The world's biggest oil exporter Saudi Arabia, said at the weekend that it and fellow OPEC members were pumping sufficient volumes to prevent shortages on world markets.

Oil prices are near two-year highs on concerns that an attack on Iraq might coincide with the ongoing strike in Venezuela, which has strangled exports from the world's fifth-biggest exporter.

"There is no shortage in the market and there should be no reason for prices where they are today," Saudi Oil Minister Ali al-Naimi told a panel in Davos.

"We checked. We called. I checked with individual customers, refineries and others. I ask them one question: Do you feel you need more oil? And the answer is no," he said.

The Organisation of the Petroleum Exporting Countries agreed two weeks ago to raise output by 1.5 million barrels per day to counter some of the shortfall caused by a nationwide strike in Venezuela. Venezuela's President Hugo Chavez hinted at the weekend that he may be forced to take up arms if he were defeated by the opposition movement, which is calling for Chavez to step down.

Venezuelan crude output has recovered from lows in December when it was running at a trickle of about 150,000 bpd against more than three million bpd before the strike, which started on December 2.

Strikers said on Sunday that production was about 986,000 bpd, 30 percent of pre-strike levels, while Chavez claimed production had reached 1.32 million bpd.

www.bayarea.com Posted on Mon, Jan. 27, 2003 ALAN CLENDENNING Associated Press

PORTO ALEGRE, Brazil - Leonilda Zurita railed against the United States on Monday for backing Bolivia's efforts to curb illegal cultivation of the coca plant - the source of cocaine but also chewed by poor Bolivians to ease hunger.

Zurita, a Quecha Indian wearing an elaborately embroidered white skirt, handed out coca leaves to anyone who approached her. She was among thousands of anti-globalization activists at the third World Social Forum, a counterpoint to the World Economic Forum in Davos, Switzerland.

Though they came from around the world, the activists were united in their anger at what they call "neoliberalism," or the perceived American control over the world through free-market economics, liberal trade and the breakdown of national borders.

"We're living with an undeclared war to defend the coca leaf, which for Bolivian peasants is a medicine that helps us put up with hunger," Zurita said. "At the root of this, I say, our struggle is with the United States."

About 30,000 acres of coca are cultivated legally in Bolivia, but there are many illegal fields the government is destroying with the financial help of the United States. Growers want more legal harvesting.

The activists blamed neoliberalism for problems ranging from sweatshops to environmental devastation and for government policies that favor foreign investors.

About 100,000 people attended the six-day forum, which closes Tuesday. The last major protest - a march against a possible U.S.-led war in Iraq and a proposed Free Trade Area of the Americas, or FTAA - was to take place Monday evening.

For many here, the United States is a bully that uses economic force to compel weaker countries to comply with its foreign policy and economic goals.

Activists from Turkey, for example, believe the United States has promised billions of dollars in debt relief to help the country's troubled economy in return for assurances that American forces can use Turkish soil to launch an invasion of Iraq.

"We directly oppose any kind of economic values being bargained that would justify the Turkish participation" in the war, said Erinc Yeldan, an economics professor with Bilkent University in Ankara.

Before hundreds of cheering activists, actor Danny Glover called for the elimination of the International Money Fund, the World Bank and the World Trade Organization, blaming them for many Third World ills.

"We have to fight and abolish those financial institutions which place us at the place where we are now, in this very fragile situation," Glover said.

Anarchist and linguist Noam Chomsky said the United States exerts its influence over other countries with more subtlety than it did decades ago.

Neoliberalism "is a new way of controlling the public that in the past was done with U.S.-backed military coups and dictatorships," he said.