www.news24.com 03/02/2003 09:09  - (SA)   Tanya Pang

Singapore - Oil prices fell for the third day in a row on Monday as Venezuela continued to bump up vital petroleum exports, while key Opec ministers warned of a possible glut in supplies in the second quarter when winter demand ebbs.

But the threat of war in Iraq, the world's eighth-biggest oil exporter, continued to keep crude well above US$30 a barrel and within $2 of a 26-month high over $35 touched in January.

US light crude slipped US30c to $33.21 a barrel, 0.9% down from Friday's settlement in New York, when it lost 34c.

Venezuelan President Hugo Chavez said on Sunday that crude production had increased to nearly 1.8 million barrels per day, 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 say current output stands at just over one million bpd, although they acknowledge it is rising.

Data from shipping agents showed Venezuela's oil exports higher at 890 000 bpd in the week to February 1, up from 550 000 bpd a week earlier but 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. The strike continues in the oil sector.

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

The Organisation of the Petroleum Exprting Countires agreed in January to raise official production limits by 1.5 million bpd on February 1 to offset the Venezuelan outage.

Opec ministers warned at the weekend that oil markets could tip into oversupply in the second quarter with warmer weather in the Northern Hemeisphere and spark a price collapse.

Opec is due to meet again in Vienna on March 11.

Iraq still wildcard

Even if Venezuelan oil exports return to normal levels soon, analysts see little chance of a big fall in oil prices until uncertainty over war in Iraq is cleared up.

Commonwealth Bank's Thurtell said US crude may head down to $30 or $31 a barrel once the strike in Venezuela was resolved.

Iraq sells roughly two million bpd of crude to the world market and traders fear supplies may be shut off if there were a military strike against Baghdad, which has threatened to retaliate against neighbouring oil exporter Kuwait where hundreds of US troops are based.

US Secretary of State Colin Powell is due to present to the UN security Council on Wednesday evidence that Iraq has been operating programmes to build banned weapons.

Top UN disarmament officials Hans Blix and Mohamed ElBaradei are expected to return to Baghdad at the end of the week as part of last-ditch efforts to secure Iraqi compliance with UN resolutions.

US President George W Bush has vowed to disarm Iraq of weapons of mass destruction it claims Baghdad has stocked, with or without backing from the international community.

www.news24.com 02/02/2003 15:30  - (SA)   Mike Peacock

London - President Thabo Mbeki warned on Sunday that a US-led military attack on Iraq would send oil prices through the roof and scupper attempts at African economic development.

Mbeki, talking to Sky Television after a meeting with British Prime Minister Tony Blair, said the Iraqi government had told him it was eager to co-operate with UN inspectors scouring the country for weapons of mass destruction.

A self-appointed champion of the developing world, Mbeki has campaigned against armed intervention fearing that war with Iraq could destabilise the Middle East and scuttle development efforts in Africa, the world's poorest continent.

"If you had a real war (oil prices) would shoot up to the extent that we would really have to say goodbye to African development," he said, adding that many of Africa's still crippling debt problems sprung from a surge in oil prices in the early 1970s.

The threat of war in the Middle East, which supplies 40% of world crude exports, and a two-month oil strike in Venezuela have already pushed prices well beyond $30.

The looming threat of war with Iraq dominated talks between Blair and Mbeki on Saturday when the South African leader delivered the same message.

"It was a very frank meeting. The president told the prime minister war with Iraq could be avoided, and he was sending his deputy foreign affairs minister to Iraq to persuade the Iraqis to be more proactive," Mbeki's spokesperson said.

"He said we must do everything to avoid a war which would have devastating consequences for the African continent and push up the price of oil," he added.

Blair is the strongest supporter of US President George W Bush's uncompromising stance on Iraq. Both men said on Friday that Iraq had just a handful of weeks to come clean about any weapons of mass destruction or face military action.

"It is possible to resolve this matter...without going to war," Mbeki insisted. "We have been talking to the Iraqi government. What they have been saying to us is that they are very keen and very willing to co-operate fully with the inspectors."

Mbeki also said any attack on Iraq must have a fresh mandate from the United Nations in the form of a new resolution.

Bush and Blair have reserved the right to wage war without a second resolution if the UN Security Council blocked it. "That decision, we are quite convinced, must come from the Security Council," Mbeki said.

www.forbes.com Reuters, 02.03.03, 1:52 AM ET By Raju Gopalakrishnan

SINGAPORE, Feb 3 (Reuters) - Speculation about the new Bank of Japan governor briefly took the dollar to a six-week high against the yen on Monday and Tokyo stocks closed almost two percent higher while much of the rest of Asia remained on holiday. With no major new development on the Iraq crisis, economic factors were driving most markets. However, prices were kept in check because the threat of war had not receded. The dollar reached a high of about 120.30 yen on speculation that policy dove Nobuyuki Nakahara would be chosen as the new central bank governor. Nakahara has advocated aggressive credit easing by the central bank, promoting a weaker yen. But the greenback fell back to 120.12 yen after Prime Minister Junichiro Koizumi denied the reports. U.S. Treasuries, which would gain from a rise in the dollar, were softer in Asia because of war concerns, however. Oil prices slipped as Venezuelan oil exports continued to recover, while OPEC ministers warned of a possible glut in supplies in the second quarter. U.S. light crude for March delivery traded 30 cents lower at $33.21 a barrel but the threat of war in Iraq, the world's eighth-biggest oil exporter, continued to keep prices well supported. "War is still very much on the cards and that is likely to counter any downward pressure on prices from Venezuela coming back to work," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney. Spot gold <XAU=> was last quoted at $371.50 per ounce, ticking higher on the threat of war and sending spot platinum to a 23-year high of about $682 per ounce. Markets were closed in China, Hong Kong, Singapore, Malaysia and Taiwan for Chinese New Year. In Tokyo, Japanese stocks opened subdued but ticked up as the yen weakened, raising prospects for exporters. At the close the Nikkei <.N225> was 1.93 percent higher at 8,500.79 points, off a high of 8,511.87 points. Analysts said that the destruction of the space shuttle Columbia was unlikely to have much of an impact on Wall Street and that that had also helped sentiment somewhat. "People were not sure how to assess the incident. But now that Globex (Nasdaq futures <0#ND:>) showed a strong footing, we can say that Wall Street will take it in its stride," said Kazunori Jinnai, general manager at Daiwa Securities SMBC's equity department. In Australia, stocks were pegged back by war jitters. The benchmark S&P/ASX 200 index <.AXJO> eased 0.5 percent to 2,942.6 points by the close. "There's no reason to step up at this stage, with uncertainty hanging over the market," said Ruppen Margarian, equities dealer at ING Investment Management. "People are waiting for a raft of reporting, we've got some economics out this week and, most importantly, (U.S. Secretary of State Colin) Powell going to the U.N.," Margarian said. Powell has promised to present evidence of Iraq's weapons programme to the U.N. Security Council on February 5 as the United States and Britain lobby world leaders for a final U.N. resolution on disarming Iraq. The United States was also due to announce manufacturing data later on Monday and key jobs data on Friday.

www.channelnewsasia.com First created : 03 February 2003 1433 hrs (SST) 0633 hrs (GMT) Last modified : 03 February 2003 1433 hrs (SST) 0633 hrs (GMT)

Anti-Chavez campaigners celebrated in Venezuela on Sunday after collecting four million signatures on a petition demanding an amendment to the constitution to reduce the president's term from six years to four.

Campaigners sang, danced and waved flags in the highway in Caracas, a popular area for opposition campaigners to meet. Under the constitution, organisers need signatures from 15 percent, or about 1.8 million, of the country's 12 million registered voters.

The amendment was one of two proposals made by Nobel Peace Prize winner and former President Jimmy Carter.

The other is to hold a referendum on Chavez's rule halfway through his six-year term, in August.

President Hugo Chavez also celebrated on Sunday.

His weekly television show was extended to six hours long, celebrating the anniversary of his four years in office.

The president was shown with a celebration cake in the Venezuelan colours.

Meanwhile, the Venezuelan opposition 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.

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

www.abc.net.au The World Today - Monday, February  3, 2003 12:14

JOHN HIGHFIELD: Opinion polls recorded in Europe show there is a great deal of public suspicion about America's designs on Iraq oil.

But the British Prime Minister, Tony Blair, says the "oil for war" argument being run is a conspiracy theory. And the US Secretary of State, Colin Powell, says Iraq's oil resources would be held in trust for Iraq's people in the event of any war.

But a new report from New York's influential Council on Foreign Relations says America's critics have ignored one important fact in all of this. Iraqi oil may be prohibitively expensive to produce. For Iraq to reproduce Saudi Arabia's oil output it would require $140 billion in new infrastructure investment. The country's vital oil exports only earn about $20 billion a year.

Rafael Epstein reports.

RAFAEL EPSTEIN: Iraq has five times more proven oil reserves than the United States and is the second biggest supply after Saudi Arabia. But it is not simply a matter of walking into the Iraqi desert and turning on the taps.

The Council on Foreign Relations in New York has just completed a report with the James Baker Institute in Texas. The institute's resource expert, Amy Meyers Jaffe, says to bring Iraq's current 2.5 million barrels of oil a day up to Saudi Arabia's 8 million barrels a day would cost $US50 to 70 billion over decade.

AMY MEYERS JAFFE: You have to understand the numbers involved and thinking about the costs of developing the resources under the ground. Just to repair the facilities that were damaged during Iraq's eight year war with Iran and then following the 1990 conflict with the United States, just to repair those facilities that still have not been fixed would cost $US5 billion.

Iraq's total revenue from oil has been running somewhere between $US10 and $US12 billion a year, you can understand that in one year that would mean they had have to then spend 50 per cent of all revenues just to fix what is currently broken.

RAFAEL EPSTEIN: People often say that Iraq has oil reserves second only to Saudi Arabia. What sort of financial investment would you need to make to have those oil reserves at their full potential?

AMY MEYERS JAFFE: Well, I mean, if you wanted to have Iraq produce at the same rates as we see production from Saudi Arabia and that is geologically possible, you, you're talking about spending something like $US50, 60, 70 billion over a five to 10 year period to get there.

It is, this is not, you know, a lot of people talk about these oil resources like we talk about electricity in our home. We think we can just flick a switch and it will come on. But it takes a scientific study of the reservoirs, it takes a, a massive drilling program. It will take in Iraq a huge enhancement of the export infrastructure that currently exists, even beyond just repairing what is broken. So you are talking about a multi-year, tens of billions of dollars program that it would it take.

RAFAEL EPSTEIN: America's critics say the issue is not access but control. Increased exports from a friendly Iraq could leave America less reliant on countries like Venezuela and it could sideline supplies from Russia and Saudi Arabia. The Saudis could even lose their influence within OPEC and the cartel itself might lose what little ability it has left to set prices.

But Iraq has signed mammoth contracts with companies from China, Russia, France and India to develop its oilfields. The contracts' legal status may remain unclear years after any way, not the least because ethnic rivalries in Iraq are often focused on resource-rich areas.

AMY MEYERS JAFFE: People said a lot of that before the United States liberated Kuwait and what we found was that for the past 10 or 12 years, the Kuwaiti Parliament has consistently voted against bringing foreign oil companies back to Kuwait to repair and enhance its oil fields. And as a result, I might add, Kuwait has seen its oil production capability fall actually in the last three or four years.

And people have talked about wanting to see a democratic, pluralistic society where people's views are represented and it's not clear. We can't know in advance.

JOHN HIGHFIELD: Amy Meyers Jaffe is an oil analyst with the James Baker Institute in Texas. Rafael Epstein with our story.

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