www.forbes.com Reuters, 01.29.03, 3:38 PM ET

NEW YORK (Reuters) - NYMEX crude oil futures ended nearly a dollar higher Wednesday amid a steep drop in heating oil and gasoline stocks due to heavy cold weather demand and refinery run cuts.

Fears that a U.S.-led attack against Iraq could begin in late February or early March also supported buying sentiment as fresh U.S. diplomatic efforts being mounted in a final bid to avert war were seen as unlikely to avert conflict.

NYMEX March crude settled up 96 cents, or 3 percent, at $33.63 a barrel, after hitting a session high of $33.85. The day's peak was not far below the 26-month high of Jan. 21 at $35.20, built on fears of a possible war on Iraq.

In London, Brent March crude settled 75 cents higher, or 2.5 percent, at $31.02 a barrel.

"The real shock that jump-started today's advance with the inventory report was not the expected 0.5 million barrel decline in crude oil stocks, but the combined 10.5 million barrel drop in product inventories," said Tim Evans, senior energy market analyst at IFR-Pegasus in New York.

The day's rally carried prices back to the top of their recent range and averted any chance that the lack of an actual declaration of war with Iraq by President Bush in his State of the Union address Tuesday night could lead to a downside break, Evans added.

NYMEX February heating oil surged 4.09 cents, or 4.4 percent, to end at 97.13 cents a gallon, after rallying to an intraday high of 97.50 cents, the highest level since Dec. 17, 2000.

NYMEX February gasoline soared 4.41 cents, or 4.8 percent, at 97.13 cents a gallon, It peaked at 97.20 cents, the highest since June 3, 2001.

The United States on Wednesday said it was beginning a "final phase" of diplomatic consultations aimed at gathering support for increasing pressure on Iraqi President Saddam Hussein to disarm in one last bid to avoid war.

But German Chancellor Gerhard Schroeder, one of the European leaders strongly opposed to the war, said Wednesday he was unsure whether diplomacy can avert conflict.

U.S. Secretary of State Colin Powell is to present intelligence about Iraq's alleged weapons of mass destruction to the U.N. Security Council on Feb. 5.

In overnight trading, prices dipped after Bush did not call for immediate war on Iraq in his Tuesday night address. The losses were limited, however, as Bush also made clear the United States was prepared to act to disarm Iraq with or without U.N. backing.

"We will consult, but let there be no misunderstanding: If Saddam Hussein does not fully disarm, for the safety of our people, and for the peace of the world, we will lead a coalition to disarm him," he said.

Iraq has consistently denied it holds banned weapons. Meanwhile, the U.S. military announced it had called up more reservists, in addition to recent orders to deploy two more aircraft carriers to the Gulf region -- bringing carriers within striking distance of Iraq to four.

In its report, the EIA said U.S. refinery runs were down 2.8 percentage points to 87.2 percent of capacity, as many refineries began seasonal maintenance.

The slower pace of processing led to a contra-seasonal draw of 3.3 million barrels in gasoline stocks.

Crude stocks fell by a modest 500,000 barrels, as refiners apparently continued to find other foreign sources for crude oil to replace barrels in the wake of a 59-day-old strike in Venezuela, a major U.S. supplier. (Reporting by Gene Ramos; editing by Gary Crosse; Reuters Messaging: gene.ramos.reuters.com@reuters.net; +1 646 223 6054; email: gene.ramos@reuters.com)

www.nzherald.co.nz 30.01.2003 8.30 am

NEW YORK - Oil prices shot up another 3 per cent on Wednesday, amid a big drop in US winter heating fuel stocks and deepening oil supply worries as the White House prepares for possible war with Iraq.

US light crude jumped US$1.15 to US$33.82 a barrel in afternoon trading, within US$1.40 of a 26-month high struck last week. London Brent blend rose 87 cents to US$31.14 a barrel.

The threat of war in the Gulf region which supplies 40 per cent of world crude exports and a strike that has cut exports from Venezuela have pushed up crude prices over 35 per cent since late November.

The White House said Wednesday the standoff with Iraq over UN disarmament demands was entering a "final phase" in which President George W. Bush and other US officials would intensify diplomacy in one last bid to avoid war.

In his State of the Union address yesterday, Bush said Iraq, the world's eighth largest oil exporter, had shown "utter contempt" for the United Nations, but stopped short of calling for immediate war.

Bush said Secretary of State Colin Powell would reveal new intelligence on Baghdad's alleged weapons of mass destruction to the UN Security Council on Feb. 5.

German Chancellor Gerhard Schroeder, one of the European leaders most strongly opposed to war on Iraq, said Wednesday he was unsure whether diplomacy would succeed in averting a conflict.

"The market has completely accepted that there will be war and that's already in the price," said Sarah Emerson, managing director at Boston-based Energy Security Analysis (ESAI).

"The timetable was set months ago by troop deployments. They will all arrive by the end of February."

The UN controls Iraq's oil revenues under the 1996 oil-for-food programme, imposed as a humanitarian exception to sanctions to allow Baghdad to purchase food and medicine for ordinary Iraqis. Over the last four weeks Iraq's oil exports in the programme have averaged 1.66 million barrels per day.

Fresh gains came as the US government reported that a two-week freeze across the eastern part of the country lopped over 3 million barrels, or 8 per cent, from heating oil stocks last week.

Supplies are now 16 per cent below normal levels. Home heating oil prices are at 23-month highs, up 25 per cent from last year strengthening concern over the economic impact of higher energy costs.

While the freeze forecast to abate in coming days, supplies may not recover as the high cost of crude oil is forcing refiners to cut their production.

"The situation is still tightening at an alarming rate, and as would be expected at this point all the pressure is on oil products" said Paul Horsnell of J.P Morgan bank.

The United States has taken about two-thirds of all Iraq's exports in January, amid a dearth of shipments from key supplier Venezuela since early December due to a national strike.

Venezuela, which normally supplies more than 13 per cent of US oil imports, is managing to bring more strike-hit oil production back onstream.

Opposition oil workers in a daily report said output tapped a million barrels a day Wednesday, a third of normal levels. The government has used troops and replacement crews to break the 59-day protest, which aims to force President Hugo Chavez to resign and call an election.

The Opec producer cartel, which pumps around a third of world oil supply agreed this month to raise production to help fill the Venezuelan shortfall.

Saudi Arabia and the United Arab Emirates are now the only nations with spare capacity to meet any further loss of global supplies.

So far, the United States has opted not to tap emergency reserves to ease supply concerns, although on Tuesday the Energy Department said it approved oil company requests to delay delivering 4.4 million barrels of crude to the Strategic Petroleum Reserve.

That oil will now be available to refineries to process into gasoline, heating oil and other petroleum products.

The reserve, created by Congress in the mid-1970s, currently holds 599 million barrels of oil in a series of underground salt caverns at four government sites in Texas and Louisiana.

www.bloomberg.com Thu, 30 Jan 2003, 11:31am EDT By Sineva Toevai

Sydney, Jan. 30 (Bloomberg) -- Australian bonds fell as a gain in local shares sapped demand for government debt with yields at about a 14-month low, analysts said.

The 6.5 percent bond maturing in May 2013 fell 0.606, or A$6.06 per A$1,000 amount, to 109.988 at 8:45 a.m. Sydney time. Its yield rose 7 basis points, or 0.07 percentage point, to 5.23 percent. The yield on the 7.5 percent bond maturing July 2005 rose 7 basis points to 4.57 percent.

Bonds rallied this month, pushing the yield on the 10-year bond close to the lowest level since November 2001 as concern a U.S.-led war against Iraq may curb economic growth boosted demand for securities that offer fixed payments.

Bond yields are at very low levels right now,'' said Peter Munckton, a debt market strategist at Commonwealth Bank of Australia, who expects the 10-year bond yield to rise to 6 percent in the first quarter of the year. Stocks look reasonably rich,'' he said.

The Australian SPI 200 stock futures contract due in March rose 0.6 percent, indicating stocks may rise when trading starts at 10 a.m.

The Australian dollar bought 58.93 U.S. cents compared with 59.05 U.S. cents in late Asian trading yesterday.

www.forbes.com Reuters, 01.29.03, 2:25 PM ET

BOGOTA, Colombia, Jan 29 (Reuters) - The Central Bank chiefs from Colombia and Venezuela will soon meet in the Colombian city of Cartagena to discuss concerns that planned Venezuelan currency controls could disrupt debt payments, Colombia's government said on Wednesday.

Colombia, which counts Venezuela as its No. 2 trading partner behind the United States, is concerned that Venezuelan businessmen will not be able to repay their sizable debts to Colombian merchants once the controls are imposed, possibly next week.

"In the coming days, these payment issues will be discussed by Central Bank directors from Colombia and Venezuelan," Finance Minister Roberto Junguito told reporters. Cartagena is Colombia's top tourist destination, a colonial town on the Caribbean coast where business meetings are frequently held.

Strike-bound Venezuela announced on Sunday it will use currency controls to protect international reserves. Government and banking sources said discussions are focused on creating a single rate for the beleaguered bolivar currency lasting four months, adjusted monthly, followed by a dual rate.

Venezuela's bolivar has slipped 28 percent against the dollar since opposition leaders launched a general strike on Dec 1, stemming oil exports from the world's No. 5 oil exporter in a bid to force President Hugo Chavez from power.

Colombia's banking association sounded the alarm over potential payment problems earlier this week, but did not provide liability figures. Analysts estimate Venezuelan businesses owe about $200 million to Colombian firms.

Between January and November last year, Colombia exported $1.07 billion to Venezuela. The figure is 33 percent lower than in the same period of 2001, showing economic troubles well beforethe damaging general strike begun in December.

www.forbes.com Reuters, 01.29.03, 2:23 PM ET By Noel Randewich

MEXICO CITY, Jan 29 (Reuters) - Corporate Mexico's fourth quarter earnings are likely to be marred by a sluggish economy as well as weakness in the peso at the end of 2002, although some companies, like beer giant Grupo Modelo and financial group Banorte, could impress investors.

"In general we can see that it's not going to be a very favorable quarter, for a number of reasons," said Jesus Viveros, an analyst in Mexico City's Bursametrica consulting company.

The reporting period, which stretches on to Feb. 27, started on a gloomy note last week when giant global cementcompany Cemex (nyse: CX - news - people) <CEMEXCPO.MX> reported a weak fourth quarter due to poor sales in the United States and Venezuela.

Final figures are yet to be released, but Mexico's central bank expects the economy to have grown by about 2 percent in the fourth quarter of 2002, compared with shrinkage in the fourth quarter of 2001.

"Although there was a certain recovery in the data, companies are still not going to report very favorable numbers," Viveros said. Analysts agreed that increasing weakness in the peso also harmed corporate results.

After strengthening to highs that led it to be coined the "super peso" in 2001, Mexico's currency lost 12 percent of its value against the dollar in 2002, damaging the profits of import-reliant businesses and companies with large dollar-denominated debts to service.

Top wireless telecom America Movil's <AMXL.MX> (nyse: AMX - news - people) net profits are expected to come in 22.5 percent lower at 1.31 billion pesos, the result of increased costs associated with servicing dollar-denominated debt as Mexico and Brazil's currencies weakened, according to a Reuters survey.

Mexico's rival television broadcasters TV Azteca <TVAZTCACPO.MX> and Televisa <TLEVISACPO.MX> will both probably announce lower earnings as a result of the weakening peso.

UBS Warburg predicted Televisa's earnings per American Depositary Receipt (ADR) (nyse: TV - news - people) would come in at $0.33, down from $0.64 a year before, as a result of the peso impact and higher tax rates.

TV Azteca's earnings per ADR (nyse: TZA - news - people) will likely be $0.16, down from $0.37 a year earlier, also because of the weak peso, said UBS Warburg.

PESO SUPPORTS MODELO But Grupo Modelo <GMODELOC.MX>, the maker of Corona, the No. 1 imported beer in the United States, will gain from the peso's weakness, analysts said.

"Modelo is going to see significant growth in operation and net earnings because a large part of its revenues are in dollars," said Rogelio Gallegos, a fund manager at Mexico City's Actinver. "They're among the few to benefit from the weaker peso."

Mexico's two widely traded banks, BBVA-Bancomer <GFBBB.MX> and Banorte <GFNORTEO.MX>, are both likely to report increased earnings -- largely the result of higher interest rates in the fourth quarter that improved the banks' interest margins, or the difference between what banks pay on deposits and the rate they collect on loans.

While analysts said both banks are likely to show some loan growth over the prior quarter, JP Morgan analyst Yolanda Courtines predicted that the growth in Banorte's credit portfolio would outpace BBVA-Bancomer's thanks to its "more aggressive" lending program.

The earnings of Mexico's largest telecom Telefonos deMexico (Telmex) <TELEMXL.MX> (nyse: TMX - news - people) are expected suffer after 18 months of frozen local and long-distance rates.

"There is not enough traffic volume to compensate for rates being frozen," said Vector brokerage telecom analyst Manuel Jimenez. Telmex, expected to report its fourth quarter results in early February, will probably show a 4 percent decline in earnings over the year-ago period, according to a Reuters poll of analysts.

Fourth-quarter earnings of Wal-Mart de Mexico (Walmex) <WALMEXV.MX>, the country's top retailer, will almost certainly suffer from the loss of an important Mexico City government gift voucher program that in previous years guaranteed a steady flow of government employees at its cash registers.

Walmex is likely to report earnings per share of 0.42 pesos, flat with the year-earlier period, forecast Credit Suisse.