www.forbes.com Reuters, 02.05.03, 5:45 PM ET

NEW YORK (Reuters) - Gold prices fell prey to profit-taking after hitting 6-1/2-year highs Wednesday while oil was lifted by a steep fall in U.S. stockpiles and Secretary of State Colin Powell's speech to the U.N. to provide evidence he said proved Iraq hid banned weapons from U.N. inspectors. COMEX gold futures ended lower as Powell laid out the U.S. case at the U.N. Security Council that Iraq had made no effort to disarm as required by U.N. resolutions to avoid war. "I guess it's a classic example of buying the rumor and selling the news," said Drummond Gill of bullion dealer ScotiaMocatta in Toronto. "I think the jury is still out. I think he did a good job of trying to make the case." COMEX April gold ended $2.70 lower at $377.20 an ounce. Bullion was also pressured by a bounce in the dollar off a four-year low and a healthy rise in the stock markets, which could not hold onto the gains and ended the day lower. "Markets don't go in straight lines ... some periodic profit-taking has to be expected," said Kevin Crisp, precious metals analyst with Dresdner Kleinwort Wasserstein. "But I don't sense a wholesale exodus. You get froth on the top of a market and it gets blown off," he added. Gold has gained $30 an ounce, or 8.6 percent, since the start of the year, bolstered by fears of a war with Iraq, jitters over North Korea's nuclear ambitions and weakness in the dollar. Overnight, Japanese investors shoveled more money into gold futures on the Tokyo Commodity Exchange (TOCOM), sending yen-based contracts to 10-1/2-year highs in record turnover. In a high stakes address to the 15-nation Security Council, Powell appeared to change few minds, with envoys from France, Russia, China, Germany, Mexico, Angola, Guinea, Syria and Cameroon expressing doubts about war and hoping inspections would continue. However, staunch ally Britain and foreign ministers from Spain and Bulgaria were forceful in endorsing his presentation while Chile and Pakistan took a more neutral position. Powell, in a bid to win over anti-war sentiment at home and abroad, said Iraq gave orders to sanitize documents referring to "nerve agents," and cleaned up chemical weapons sites. The Bush administration argues that war may be the only way to stop Saddam Hussein's defiance of U.N. resolutions. NYMEX crude oil futures rose 1 percent following Powell's U.N. speech and government data showing a steep fall in U.S. stocks of heating oil, as freezing temperatures stoked demand and fuel distributors began to hoard supplies ahead of a possible war. "I don't think that Powell was persuasive enough to convince, let's say, the French. That may lead to the U.S. having to go on its own or with a small international group," said Tim Evans, senior market analyst at IFR-Pegasus. NYMEX March crude oil settled 35 cents higher at $33.93 a barrel, after hitting a high of $34.28. March gasoline was up 3.09 cents at $1.0315 cents a gallon, while March heating oil was up 3.21 cents at 99.40 cents a gallon. Prices were supported by news of a big drop in U.S. fuel stocks -- already depleted by a 65-day opposition strike in Venezuela, which normally supplies over 13 percent of U.S. crude and refined product imports. U.S. heating oil stocks shrank 11 percent after a long cold snap in the high-consumption Northeast region, a government report showed. Stocks have been depleted by cutbacks in U.S. refinery production as high crude oil prices slash plants' profit margins. "Without the flexibility that ample inventories provide, oil markets now are as tight as a fully stretched rubber band. Whether the rubber band breaks or not will largely depend on the pace of demand in coming weeks," the EIA said. Distillate stocks, including diesel fuel and heating oil, dropped 10.3 million barrels, the second largest weekly drop on record. Distillate fuel demand recorded the highest weekly average ever, the Energy Information Administration said. "That's far above what was expected from weather," said Jim Ritterbusch, president of Ritterbusch and Associates in Illinois. "Distributors are stocking up in advance of a war." (Reporting by K.T. Arasu, edited by Gary Crosse; Reuters Messaging kumarasamy.thennarasu.reuters.com@reuters.net; 312 408 8720)

biz.scmp.com Thursday, February 6, 2003 REUTERS in Singapore    PetroChina has made its first direct petrol sale to the United States' Gulf Coast, taking advantage of a squeeze in US supplies due to a drop in exports from strike-bound Venezuela, traders said yesterday.

The top Chinese oil firm had fixed a 40,000-tonne parcel of 90-octane petroleum, for loading early this month, from the northeast Chinese port of Dalian to the US Gulf, they said.

"Chinese barrels normally move to the US via traders or majors when the arbitrage window is open, but this is the first time PetroChina has sold gasoline on a delivered basis," a trader said.

She said the cargo had been sold to an oil major, but declined to give details.

PetroChina, China's second-largest refiner, accounts for about 40 per cent of China's total petroleum exports, which amounted to 51.7 million barrels last year.

Asia-based traders expect the strong US market to draw fresh shipments of Asian petroleum this month, following a slew of US-bound cargoes last month from China, South Korea and Singapore.

A two-month general strike in Venezuela has severely disrupted overseas oil sales from the world's fifth-biggest exporter, which supplies about 13 per cent of US oil imports.

The disruption has eaten into US fuel stocks, pushing up benchmark oil prices in the process.

boston.com By Associated Press, 2/5/2003 16:07

CARACAS, Venezuela (AP) Smarting from a failed strike to oust President Hugo Chavez, Venezuelan businessmen warned Wednesday that plans to restrict access to foreign currency will bury the reeling economy.

Chavez's leftist government plans to announce the restrictions on Thursday, to try to stop a devaluation of the bolivar and protect Venezuela's foreign reserves, which shrank $2 billion during the two-month strike.

Details have not been released. But Chavez vowed Tuesday to punish strike leaders by restricting their ability to purchase U.S. dollars, an essential in a nation heavily dependent on imports.

He accused those he calls ''coup plotters'' of stashing billions of dollars abroad ''our international reserves, belonging to the nation, to the Republic.''

That could force thousands of businesses to close for lack of supplies and leave tens of thousands jobless, business leaders warned.

Already, analysts say the failed two-month strike to oust Chavez will close more than 20,000 businesses and leave 200,000 people jobless.

Strike leader Carlos Fernandez, head of the Fedecamaras business federation, said Chavez was trying to impose control over the struggling private sector, which relies on imports for 60 percent of its supplies and raw materials.

Lope Mendoza, president of the Conindustria business chamber, urged citizens in the import-crazy nation to buy Venezuelan products to keep the economy afloat. ''The industrial sector isn't going to please the president, who wants to see a cemetery of businesses,'' Mendoza said.

Chavez's threat on Tuesday to provide ''not one more dollar for the coup plotters'' showed he will devise a discretionary system that will ''hand out prizes and punishments,'' said analyst Luis Vicente Leon.

''He is going to control his enemies' income. Venezuela is too dependent on imports,'' Leon said.

Chavez's government suspended dollar purchases on Jan. 22 after the bolivar lost more than 30 percent of its worth during the strike, which began Dec. 2 and ended in all sectors but oil this week.

Foreign reserves dropped $2 billion in part because the government was spending $60 million a day to prop up the bolivar.

The bolivar last traded at 1,850 to the dollar. On the black market, it's 2,500 per dollar. Devaluation, in turn, sent inflation past 30 percent, and many economists forecast a 25 percent recession this year.

Finance Minister Tobias Noriega said a fixed rate between 1,600 and 1,850 bolivars per dollar will be adopted for imports of food, medicines and government transactions.

It wasn't known how many dollars the government will make available to citizens and businesses, what conditions they must meet to buy dollars, and how many dollars they can buy.

Some newspapers speculated Wednesday that citizens will face restrictions on the amount of dollars they can buy for business travel abroad.

Also Wednesday, the government opened an investigation into a fifth private television station, Venevision, for allegedly breaching broadcast law by supporting the strike.

Chavez accuses Venevision, Globovision, Radio Caracas Television, Televen and a regional station in the southwestern state of Tachira of supporting efforts to overthrow him. The stations could be fined or suspended.

On Tuesday, the government said it would investigate whether some radio stations should have their broadcast licenses revoked for airing ''violent propaganda.''

The government is preparing a media content law governing what and when radio and TV stations can broadcast.

Media owners accuse Chavez of inciting his followers to attack journalists and abusing a law that allows presidents to interrupt private programming to broadcast speeches or government messages.

www.morningstar.ca 5 Feb 03(3:28 PM) | E-mail Article to a Friend

NEW YORK (Reuters) - World oil prices rose 1 percent on Wednesday as Secretary of State Colin Powell at the United Nations sought to convince the world of the need for war to disarm Middle East oil producer Iraq.

Further strength came from a U.S. government report showing a steep fall in stocks of heating oil, as freezing temperatures stoked demand and fuel distributors began to hoard supplies ahead of possible war.

U.S. light crude rose 40 cents to $33.98 a barrel, still $1.20 below two-year highs struck last month. In London, benchmark Brent crude for March delivery rose 27 cents to $31.36 a barrel.

Heating oil futures hit $1 a gallon for the first time since December 2000, while gasoline futures rose to their highest level in 20 months.

The U.S. has vowed to disarm Iraq, the world's eighth biggest oil exporter, by force if necessary. Traders fear this could disrupt supplies from other producers in the Middle East, which pumps a third of the world's crude. Oil prices have risen 35 percent since November.

Presenting U.S. intelligence from spy satellites, telephone intercepts and Iraqi defectors, Powell argued that Iraq had concealed equipment from its suspected weapons programs to flout the U.N. inspectors searching the country for evidence of chemical, biological and nuclear arms.

France's foreign minister called on the U.N. Security Council to strengthen its inspection regime in Iraq and said military action against Baghdad should be only a final resort.

Russia's foreign minister said the U.S. information must now be verified by U.N. inspectors inside Iraq.

"I don't think that Powell was persuasive enough to convince, let's say, the French. That may lead to the U.S. having to go on its own or with a small international group," said Tim Evans, senior market analyst at IFR-Pegasus.

DEPLETED STOCKS

Prices were supported by news of a big drop in U.S. fuel stocks -- already depleted by a 65-day opposition strike in Venezuela, which normally supplies over 13 percent of U.S. crude and refined product imports.

U.S. heating oil stocks shrank 11 percent after a long cold snap in the high consumption Northeast region, a government report showed. Stocks have been depleted by cutbacks in U.S. refinery production as high crude oil prices slash plants' profit margins.

"Without the flexibility that ample inventories provide, oil markets now are as tight as a fully stretched rubber band. Whether the rubber band breaks or not will largely depend on the pace of demand in coming weeks," the EIA said.

Distillate stocks, including diesel fuel and heating oil, dropped 10.3 million barrels, the second largest weekly drop on record. Distillate fuel demand recorded the highest weekly average ever, the Energy Information Administration said.

"That's far above what was expected from weather," said Jim Ritterbusch, president of Ritterbusch and Associates in Illinois. "Distributors are stocking up in advance of a war."

Fears of a shortfall in gasoline supplies ahead of the summer vacation driving season are rising as refineries in Venezuela, normally a big gasoline supplier to the United States, remain well below capacity because of the strike.

Gasoline stocks dropped sharply too as refineries slowed operations. Stocks are now more than 5 five percent below last year.

Venezuela's crude oil supply is gradually recovering after the government succeeded in using replacement workers to restart operations. The opposition has called off strike in the non-oil sectors.

Ministers from the OPEC oil cartel have warned that as Venezuelan crude was coming back onstream, there could be a supply glut by the second quarter when demand drops off at the end of Northern Hemisphere winter. (Reporting by Andrew Mitchell; editing by Gary Crosse; Reuters Messaging: andrew.mitchell.reuters.com@reuters.net; +1 646 223 6051)

reuters.com Wed February 5, 2003 03:40 PM ET

NEW YORK (Reuters) - U.S. heating oil stocks shrank 11 percent last week, as frigid temperatures stoked demand and distributors stocked up ahead of looming war in Iraq, government figures showed Wednesday.

Distillate stocks, including diesel fuel and heating oil, held by oil companies dropped 10.3 million barrels to 112.1 million barrels in the week to last Friday, the Energy Information Administration said in its Weekly Petroleum Status Report.

Primary heating oil stocks alone dropped 5.4 million barrels to 42.5 million barrels, partly the result of a long cold snap in the high-consumption Northeast region. The figures exclude secondary inventories held by retailers or distributors,

"That's far above what was expected from weather," said Jim Ritterbusch, president of Ritterbusch and Associates in Illinois. "Distributors are stocking up in advance of a war."

Distillate fuel demand last week averaged 4.9 million barrels per day (bpd), the highest weekly average ever, and was up 10.5 percent from a year ago over the last four weeks, the EIA said. Distillate stocks have fallen 17.1 million barrels, or 13 percent, in the last two weeks.

Oil prices jumped after the report, with New York crude futures rising 35 cents to $33.93 a barrel. Heating oil futures hit $1 a gallon for the first time since Dec. 2000.

Stocks were further depleted by further cutbacks in production by refiners, whose profit margins have been slashed by high crude oil costs as a two-month oil strike in Venezuela has pushed oil prices to two-year highs.

Refineries were operating at 85.8 percent of capacity last week, down from 87.2 percent the previous week, the EIA said.

Gasoline stocks dropped 3.4 million barrels to 209.6 million barrels as refineries slowed operations. Stocks are now more than 5 percent below last year.

Refineries in Venezuela, normally a big gasoline supplier to the United States, are still operating well below capacity because of the strike, raising fears of a shortfall in gasoline supplies ahead of the summer vacation driving season.

Reformulated gasoline stocks alone fell 4.2 million barrels to 35.4 million barrels, down 23 percent from last year.

Total fuel demand over the last four-week period averaged 20.1 million bpd, or about 4.9 percent more than the same period last year, the EIA said. Over the last four weeks, motor gasoline demand was up 5.0 percent, and residual fuel demand up 15.7 percent compared with the same period last year.

"Refiners weren't producing because of lousy margins and the consumers were consuming," said Mike Fitzpatrick, analyst with Fimat USA.

Crude oil stocks edged up 1 million barrels to 274.3 million barrels, the EIA said, continuing to hold just above 26-year lows.

The draw on product stocks has sharply increased the premium for heating oil and gasoline over crude oil -- the "crack spread." This has already begun to improve refiners' profit margins and should encourage them to refine more crude in coming weeks.

Gross refining margins more than doubled to $5.75 for each barrel of crude oil distilled last week, according to Salomon Smith Barney.

"The main impact will be to expand the heat cracks further," said Ritterbusch.

The American Petroleum Institute, an industry group, reported that distillate stocks fell 8.7 million barrels, and gasoline stocks dropped 3 million barrels. API said crude stocks dropped 79,000 barrels.