www.morningstar.ca 3 Feb 03(7:14 AM) |  E-mail Article to a Friend By Barbara Lewis

LONDON (Reuters) - Oil prices fell on Monday as Venezuelan exports recovered from a supply-choking strike and after OPEC ministers warned of a glut in supplies in the second quarter when winter demand ebbs.

But the threat of a U.S.-led war on oil-producer Iraq kept crude above $30 a barrel.

In London, IPE Brent crude was trading 38 cents weaker at $30.72 a barrel, while U.S. light crude slipped 31 cents to $33.20 a barrel.

"The Venezuelan strike is clearly cracking. The question is how quickly they can ramp up production," said J.P. Morgan's Paul Horsnell.

Venezuelan President Hugo Chavez said on Sunday crude oil output had risen to nearly 1.8 million barrels per day (bpd), up from a low of 150,000 bpd after the strike began in December and more than half of the 3.1 million bpd pumped in November.

Oil strikers said production stood at just over one million bpd and acknowledged it was rising.

Data from shipping agents showed Venezuela's oil exports rose to 890,000 bpd in the week to February 1 from 550,000 bpd a week earlier, but were still only one-third of normal levels of 2.7 million bpd before the strike.

Opposition leaders, who want Chavez to resign, scaled back the nine-week action on Sunday in the non-oil sector only.

OPEC CONCERNS OVER GLUT

A return of oil sales from Venezuela, the world's fifth biggest oil exporter, could put pressure on the OPEC producers' group to rein in output.

The Organization of the Petroleum Exporting Countries agreed in January to raise official production limits by 1.5 million bpd from February 1 to offset the Venezuelan outage.

But OPEC ministers warned at the weekend that oil markets could tip into oversupply in the second quarter and trigger a price collapse.

"If Venezuela comes back (to full capacity), we could have four million bpd or more floating," said OPEC President and Qatari Oil Minister Abdullah al-Attiyah.

Non-OPEC supplies also looked robust, with output from Russia, the world's second largest exporter, hitting a post-Soviet high.

Russian Energy Ministry sources said exports via Russia's Transneft pipeline monopoly rose 200,000 bpd in January compared to December and output reached a new high of 8.07 million bpd.

But even if supplies have grown, analysts predict oil prices will not fall far until uncertainty is resolved over Iraq, which sells roughly two million bpd of crude to the world market.

Traders fear supplies might be disrupted, not just from Iraq, but from elsewhere in the oil-rich Middle East if there is a military strike against Baghdad.

"I think the market risks translate into a few dollars to the downside and over $10 upside at the moment," said Sydney-based independent oil analyst Simon Games-Thomas.

"In the short term the market is stuck," said J.P. Morgan's Horsnell.

He said dealers were awaiting Secretary of State Colin Powell address to the United Nations on Wednesday when he has pledged to present "straightforward, sober and compelling" proof that Iraq is hiding banned weapons.

Writing in the Wall Street Journal, Powell said the United States sought peaceful disarmament.

"But we will not shrink from war if that is the only way to rid Iraq of its weapons of mass destruction," he wrote.

www.dw-world.de   Venezuela's opposition has declared its 63-day general strike ended, except in the oil sector, and switched tack by launching a non- binding petition telling President Hugo Chavez to hold elections. A defiant Chavez claimed he had defeated strikers, saying oil production was approaching two million barrels per day, around two-thirds the normal level. Strikers put output at one million. The opposition petition has 3.7 million signatures, according to organisers. Chavez has rejected an early election, saying the constitution does not allow a referendum until August. On Sunday, five people were hurt as police intervened between Chavez supporters and opponents who'd queued to sign the petition.

www.smh.com.au February 4 2003

The Venezuelan opposition yesterday officially declared an end to a 63-day general strike that has paralysed the country's economy and reduced its oil exports to a trickle.

But the opposition pointed out that its struggle against the government of populist President Hugo Chavez was just entering a "new phase".

"The Democratic Coordinating Committee announced that tonight we are entering a long-expected and more trying new phase in our struggle," opposition spokesman Timoteo Zambrano

He said although the strike was ending, the protesters will not abandon thousands of employees of Petroleos de Venezuela, the state-run oil company, who have been dismissed by the Chavez government.

"Our struggle will now assume new forms, and we will pursue out goals at the negotiation table.

Opposition business, labour and political leaders launched the strike two months ago in criticism of what they say is Chavez's autocratic style.

The strike has caused Venezuela billions of dollars in losses, largely because it slashed oil shipments from the world's fifth largest oil exporter.

The Organisation of American States and former US President Jimmy Carter have attempted to bring government and opposition together.

Last month, the United States, Spain, Portugal, Mexico, Chile and Brazil formed the "Group of Friends of Venezuela" to broker a deal.

Opposition leaders planned to allow schools, shops, grocery stores and industry to resume operation during the coming week, while stepping up street demonstrations aimed at pushing Chavez out of office.

news.ft.com By Nerma Jelacic in London Published: February 3 2003 12:11 | Last Updated: February 3 2003 17:22

Platinum hit a 23-year high on Monday buoyed by speculative and fund buying while supply fears continued to support the precious metal.

The commodity, used in autocatalysts and jewellery, has risen about 14 per cent so far this year as the demand remained high.

Last week platinum was boosted further by George W Bush's State of the Union speech in which the US president called for greater research into fuel-cell technology, which relies on platinum.

But the biggest catalyst for platinum's rise has been fear of supply shortage amid possibility of industrial action at Russia's Norilsk Nickel, the world's fifth-largest producer of the metal.

At 1720 GMT platinum was trading at $697 an ounce having earlier hit a high of $701 an ounce - its highest level since March 1980.

But analysts were unsure about the metal's ability to sustain the recent gains. "Platinum looks increasingly vulnerable to a pull back after the recent rally. At the margin dollar weakness will help... but to a lesser degree than has been apparent in the gold market," said Andy Maag, precious metals analyst with UBS Warburg.

Gold remained near its six-year highs in quiet trade as investors looked ahead to US Secretary of State Colin Powell's visit to the UN Security Council on Wednesday in which he is expected to offer proof that Iraq has not disarmed.

The commodity was trading at $370.40 an ounce in late afternoon trade in London off its high of $371.60 an ounce. Investors were also put off the precious metal by a rally in the US dollar.

The currency rose to its best level this year against the yen and also pushed the euro lower ahead of the release of some key economic data later on Monday.

"The closer we are getting to the testimony of Colin Powell the more reluctant speculators will be in taking positions. The euro will dictate the market within this range," said Mr Maag.

Brent crude prices fell on Monday after the Venezuelan opposition declared an end to the 63-day general strike that has crippled oil production in the world's fifth largest exporter.

Brent crude for March delivery was 42 cents lower at $30.68 per barrel off the previous session's fix of $31.10 per barrel.

But there was uncertainty surrounding the declaration after executives said stoppages will continue in the oil industry. Exports from the South American country have increased in recent weeks as supporters of president Chavez worked to keep the country's oil terminals open but exports remain at about half of the pre-strike levels.

Comments from oil ministers at Opec's oil conference over the weekend added pressure on the commodity. Ministers expressed their concern that the oil market could become oversupplied adding that Venezuela's return to full-scale production could see 4m barrels per day or more floating.

www.atimes.com By Abhrajit Gangopadhyay BANGALORE - All roads in Mumbai, the commercial capital of India, these days lead to Zaveri Bazaar, where office orderlies rub shoulders with software professionals in the long queues lined up to sell their gold holdings for record prices at the jewelry stores massed in the market. People are selling off their heirloom gold ornaments - traditionally cherished among Indians - and coins as war fears in the Middle East have propelled gold prices to new heights over the past few weeks. Expat Indians are also pumping in forex exchange and converting part of their asset holdings into gold as they seek a safer haven for savings. The London-based Gold Fields Mineral Services (GFMS) an independent consulting company, forecasts that the price of gold will stay above US$370 per ounce (where it has been for the past weeks) if the US-Iraq crisis develops into a long war. And as has already happened, the high gold price will affect demand for gold jewelry in price-sensitive markets such as India. In its latest survey, GFMS said, "If the Iraqi crisis blows up into a lengthy war, we could easily see the market at over $370. There is a possibility of gold jewelry demand picking up in India in the first half of 2003, provided prices ease below $340, and only in comparison to a poor first half of last year." The $370 level for gold was last seen in March 1996. Investors are diverting their funds to precious metals not only on war fears, but also because of sliding equity markets and the weakness of the dollar in forex markets. "If we don't see prices easing back to more like $330 and, instead, they hold at over $350, we could easily see fabrication during the first half of 2003 slumping below last year's low levels," GFMS said in the survey. GFMS added that total gold fabrication had declined by over 10 percent during 2002, mainly as the price rise led to a slump in jewelry manufacture in markets such as West Asia and India. The price of gold has risen 25 percent in the past year. Mirroring gold in its rise is platinum. Prices for the metal rose to a 17-year high last week. Concerns over a supply disruption from Russia and South Africa, the two largest producers of the metal, had led the price rally. In India, the sharp rise in scrap supply and zooming global prices have severely crimped Indian gold imports during the current high-demand marriage season, which started last week. Jewelers are buying old ornaments at a discount to current prices and recycling them, instead of using new gold bars, traders said. Imports account for more than two-thirds of Indian gold consumption, the largest in the world, and these are declined with the rise in price. Daily gold imports into Jaipur, a leading bullion trading center in the country, are expected to slip to just 100 bars (of 116.64 grams each) - from about 500 bars in recent weeks. Jaipur usually imports an average of 3,000 bars a day. Jewelry sales down Sales of gold jewelry, which account for 85 percent of Indian gold demand, have fallen sharply due to volatile prices, traders say. However, compulsory buying, such as for weddings, will continue to take place despite volatile prices, traders said. Gold jewelery is an essential part of Hindu marriages, when parents gift it to their daughters for financial security. The wedding season begins in mid-January and ends in March. Domestic gold sales for July-September - the latest figures available - fell 8.5 percent year-on-year to 116.4 tonnes. Imports fell 12.3 percent to 87 tonnes, according to the World Trade Council. Driven by fears that a war in Iraq may force them to repatriate, Indians based in the Gulf are sending their money home, swelling foreign exchange reserves to record levels and shoring up rupee sentiment. India's forex reserves, the world's seventh-largest at $73.2 billion and equivalent to 14 months of imports, could top $80 billion by March, analysts said. Gold reserves are $3.444 billion. For overseas Indians, their banking system offers a safer refuge than the Gulf, even though India suffers from its own problems with political risk. More than 3 million of India's 20 million overseas population work in the Gulf and interest rate differentials of nearly 200 to 250 basis points between the rupee and foreign currency deposits were an added attraction, traders said. The record reserves have encouraged global rating agency Moody's to declare that it may raise the country's forex debt rating from "Ba2" in February. Such an upgrade would further boost inflows from expatriates and foreign investors buying Indian assets, traders said. Overseas workers also draw comfort from India's dismantling of some its archaic capital controls, making forex repatriation easier. Rising rupee Expatriates' remittances and rising trade inflows helped the partially convertible rupee to rise 0.55 percent against the US dollar in 2002, its first annual gain in more than a decade, and 2.3 percent to 47.94/95 from its all-time low in mid-May. Data from the Reserve Bank of India shows that expatriates' deposits rose nearly $1.6 billion to $26.73 billion in the first six months of the current year to March. In the December quarter, deposits may have grown by $1 billion to $1.5 billion after an aggressive rate cut by the US Fed Reserve in November, traders estimate. Their remittances are expected to exceed another $1.5 billion before the financial year ends in March. Traders said that the large unhedged positions of Indian companies that raised forex loans could pose a problem if there were a sudden reversal in sentiment on the rupee, or a war broke out in the Gulf and sent oil prices soaring. Also, importers are loathe to hedge their requirements because of a weakening dollar and the comfortable external position, including a current account surplus of $1.34 billion in the July-September quarter - the third straight quarter of surplus. India imports 70 percent of its crude oil requirements, which form two-thirds of the annual import bill of nearly $60 billion. Oil has stayed above $30 a barrel in recent weeks due to fears of a US-led war in Iraq and a strike in Venezuela. "We could see an outflow of $8 billion to $10 billion in a matter of weeks as importers will rush to cover and the effects of the relaxed capital controls are seen," said a treasury head at one leading private sector bank. (©2003 Asia Times Online Co, Ltd. All rights reserved. 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