reuters.com Thu February 20, 2003 01:52 AM ET By Tanya Pang

SINGAPORE (Reuters) - Oil prices were little changed near a 29-month peak Thursday, ahead of new data that may show further shrinkage in wafer-thin U.S. fuel stockpiles as the United States gears up for a possible invasion of oil-rich Iraq.

U.S. light crude CLc1 slipped 10 cents to $37.06 a barrel, just below a high at $37.45 struck Wednesday, which marked the highest level since September 2000 when soaring oil markets prompted the U.S. government to release emergency reserves.

Crude is just $4 below an all-time peak at $41.15 posted in the build up to the Gulf War in 1990.

Continued disruptions to strike-bound Venezuelan oil exports and possible interruptions to crude flows from Nigeria as oil workers down tools in a dispute over pay and conditions have stoked prices higher as well as the threat of an attack on Iraq.

Venezuela is fifth in world oil exporter rankings, while Nigeria is seventh and Iraq eighth.

"The market's still preoccupied with potential war, but it's not only that. Inventories are running very low and there's a real lack of any meaningful spare capacity," said Mario Traviati, head of energy at Merrill Lynch in Asia-Pacific.

"Anymore disruption to production would leave the world short of oil," he said.

The Energy Information Administration (EIA) is due to release its weekly U.S. fuel supply assessment Thursday, a day later than usual due to the public holiday earlier this week.

The EIA figures are used as a barometer for the demand and supply balance in the world's biggest oil consumer.

Figures last week showed U.S. crude stocks running at the lowest levels since the mid-1970s at just below 270 million barrels, the minimum needed to keep U.S. refineries operating.

A blast of Arctic weather has pumped up demand for heating fuel in the United States, where fuel supplies were already running down due to the anti-government strike in Venezuela, which crippled the domestic oil industry and all but cut off some 13 percent of U.S. oil imports.

Analysts forecast this week's EIA report would show further declines, with crude seen off by one million barrels and distillates, which include key heating oil, falling by three million barrels.

OPEC PLEDGES OIL

Striking state oil workers said Wednesday that Venezuelan crude production was at 1.4 million barrels per day, although the government pegged output closer to two million bpd.

Before the strike began on December 2, production was a little over three million bpd.

Exports from Nigeria, Africa's biggest producer, appeared not to have been affected so far by a strike by senior oil workers, who began their dispute Saturday.

Talks to resolve the dispute were due Thursday, postponed from a day earlier to allow union leaders to travel to Abuja.

Nigeria and Iraq export roughly two million bpd and, along with Venezuela, are members of the Organization of the Petroleum Exporting Countries.

OPEC has pledge to maintain stable supplies to the global market of 76 million bpd even in the event of war.

A Gulf source said Wednesday that Saudi Arabia, the world's biggest exporter, would support a temporary suspension of the cartel's official output limits if an attack halted overseas sales from Iraq.

The senior OPEC delegate said that even if OPEC did not formally suspend production limits, members with spare capacity would pump at will.

OPEC's current production ceiling stands at 24.5 million bpd with most members near to or at full capacity. The cartel is due to hold a policy meeting on March 11, which may be about the timing of a strike on Iraq.

The United States and Britain said Wednesday they were working on a new resolution seeking United Nations' authorization to use force to disarm Iraq of banned weapons they claim it has stocked. The new resolution is expected to be submitted to the Security Council within a week.

Diplomats said Washington was not likely to push for a vote on the resolution until well into the first week of March after another report by U.N. weapons inspectors, an indication that any attack against Iraq will not take place until the second week of the month at the earliest.

Iraq denies U.S. allegations that it has stocked any biological, chemical or nuclear weapons.

www.quicken.com Thursday, Febuary 20, 2003 01:26 AM ET  Printer-friendly version Associated Press

PUTRAJAYA, Malaysia -- Malaysian Prime Minister Mahathir Mohamad warned that any war with Iraq could push the price of oil up to US$50 a barrel and spark a surge in terrorism by angry Muslims.

Mr. Mahathir, who assumes chairmanship of the Non-Aligned Movement next week, also said that a new U.N. resolution on Iraq shouldn't merely rubber-stamp efforts by the U.S. and U.K. to justify an attack.

"It must be meaningful, not just a change of words with the intention that whatever happens, war must be declared on Iraq," Mr. Mahathir said in an exclusive interview with the Associated Press.

Washington and London are preparing to introduce a new security council resolution that could pave the way for military action against Baghdad if it fails to prove it has eliminated all weapons of mass destruction.

Mr. Mahathir said this was unacceptable to the Non-Aligned Movement - which groups 114 mostly developing nations and is one of the world's largest political organizations.

In a wide-ranging interview, Mr. Mahathir, who has been in office since 1981, warned that Iraq might destroy its oil fields if attacked and that world prices would rise quickly.

"Looking at what Iraq did in Kuwait, where it burned its oil fields, for a long time its oil will not be available and we still have dependence on Saudi oil and oil from Venezuela ... which of course will cause a rise in the price of oil maybe to US$50 a barrel," Mr. Mahathir said.

Nymex crude-oil futures rose Wednesday to a fresh 29-month high, with the March contract up 20 cents to $37.16 a barrel, as traders continued to fret about military action against Iraq.

The Malaysian leader also predicted that an attack on Iraq could set back efforts against international terrorism.

"I don't think overthrowing Saddam and trying to install a new democratic government is a solution that can actually happen," he said. "At the same time, it will cause a great deal of anger among Muslims worldwide and will contribute toward increasing the possibility of terrorism."

Malaysia has been an active ally in the U.S.-led war on terrorism, arresting scores of suspected terrorists and assisting Indonesia in its hunt for militants suspected in nightclub bombings in October on the Indonesian island of Bali where more than 200 people died.

But Mr. Mahathir criticized Washington's conduct of the war on terrorism, saying its focus had shifted to the confrontation with Iraq.

Mr. Mahathir complained that the West ignored a key cause of religious extremism, namely "the expropriation of Palestinian land to create the state of Israel."

"We insist that you should look into the causes. People don't just blow themselves up without reason," Mr. Mahathir said.

Dow Jones Newswires 02-20-03 0126ET

www.jamaicaobserver.com Observer Reporter Thursday, February 20, 2003

JAMAICA has been named to two regional task forces that Caribbean Community (Caricom) leaders established last week to fast track the implementation of an economic union and develop an energy policy for the region, Prime Minister P J Patterson disclosed.

Patterson, who attended the 14th inter-sessional meeting of Caricom heads of government in Trinidad and Tobago last week, said Jamaica, Barbados and the host country had decided to move ahead of the 15-member grouping to get their economies ready one year earlier to participate in the imminent Caribbean Single Market and Economy (CSME).

"Jamaica has committed itself to be CSME ready by 2004," Patterson told reporters at Jamaica House on Monday.

The CSME, scheduled to come into force in 2005, is intended to be a single economic space comprised of most, if not all, Caricom member countries, which will allow the free flow of goods, services, financial and human resources across the region.

One of the task forces, Patterson said, was to determine the resources required by less prepared Caricom member states to bring them to a state of full readiness for implementing the CSME. In this regard, a report is to be presented to the heads of government during their conference to be held in July in Jamaica.

The formation of the CSME is being done in the shadow of the emergence of a larger hemispheric grouping -- the Free Trade Area of the Americas (FTAA) -- which will involve countries of North, Central and South America and the Caribbean and is to come into force in December 2005.

According to Patterson, who has responsibility for external negotiations among Caricom heads, last week's meeting in Trinidad and Tobago agreed that the region should negotiate the FTAA agreement as a "united force".

Patterson said regional heads set up the second task force to make recommendations regarding "a regional energy policy and strategy to deal with the issues of (oil) supplies and prices" within the framework of the CSME. The issue of energy and oil supply was discussed at last week's inter-sessional meeting in light of the rise in oil prices consequent on the threat of military attack on Iraq, one of the largest producers of oil.

Furthermore, Patterson noted, the recent general strike in Venezuela had badly affected supplies to Jamaica and other regional countries. He added that Jamaica would continue bilateral talks with Port of Spain on arrangements to supply Kingston with Liquid Natural Gas as part of "our national energy diversification strategy".

The energy task force is to also report to the Heads in July.

www.nytimes.com February 20, 2003 By NICK MADIGAN

OS ANGELES, Feb. 19 — Beyond antiwar demonstrations and troop deployments, gasoline prices that have jumped to more than $2 a gallon in some places seem to many drivers to be the most tangible evidence of the Bush administration's plans for a possible attack on Iraq.

People pumping gas from Los Angeles to Charlotte, N.C., in the past few days surmised that the oil companies were cashing in on the uncertain geopolitical climate, with the effect trickling down to the corner gas station.

"If there's a chance of the oil companies' driving up the prices, they'll do that," said Jeremy Levenson, a doctor who had just paid $30.63 — at $2.09 a gallon, the most he had ever spent — to fill the tank of his Infiniti I30 with high-octane gasoline at a Union 76 station in the Westchester district of Los Angeles.

"Who knows how much of this is artifice and how much is created by the oil companies for their own benefit?" he asked. "It's what the traffic will bear. It's capitalism."

Since late last year, the price of gasoline has risen an average of 29 cents a gallon, according to the American Petroleum Institute, a trade group representing more than 400 oil and natural gas companies.

According to AAA, the motorist club, which assembles a daily compilation of gas prices, today's national average for regular unleaded gas was $1.66 a gallon, a few cents shy of the record average, $1.71, reached on May 15, 2001. Here in California, gasoline costs more than anywhere else in the country, with drivers today paying about $1.89 a gallon for regular unleaded gas and $2.05 for premium, AAA reported. Prices in Hawaii, usually the highest, were just a cent or two less. In New York State, regular was selling today for an average for $1.76 a gallon, with premium at $1.92; in New Jersey, home to many refineries, regular was $1.55 a gallon, while premium was $1.73.

But several factors are in the mix behind rising gas prices, including the possibility of war, said John Felmy, the petroleum institute's chief economist.

"You either believe in conspiracies or you believe in market fundamentals," Mr. Felmy said. "Most consumers just see the price going up and down, but they don't look into why."

Among the main reasons for the rise in prices, he said, was a 78-day strike by oil workers in Venezuela that removed as much as 4 percent of the world's supply for oil from the market. The United States imports 9 percent of its daily oil consumption — primarily crude oil and petroleum products like diesel fuel and asphalt — from Venezuela.

A similar strike in Nigeria has also affected the marketplace, Mr. Felmy said, though on a lesser scale. And the sharply colder weather has increased demand for home heating oil.

Inventories of crude oil are low and refiners have scaled back production accordingly. Typically, they stockpile oil this time of year to produce more gas as the heavy driving summer months approach. But because they are not stockpiling now, prices will probably stay high through the spring.

"There is some nervousness about Iraq," Mr. Felmy said, "and that's created some instability in the markets. Importers, traders and refineries tend to stock up, and so some participants put their prices up. If you don't, you exhaust your supply."

Such explanations seem to be small consolation to consumers.

"My theory is that they're stacking up on profits right now for if we do go to war," said Kathy Reilly, a minivan driver in Seattle. "I think a lot of it is pure greed."

Tim Jones, a computer network administrator from Tucson, recalled that in August 1990, immediately after Iraq's invasion of Kuwait, the price of gasoline soared virtually overnight. "And that fuel was already here, already in the tanks, already paid for," Mr. Jones said. "It's all about money."

Earlier this month, in Ann Arbor, Mich., Kathi Kelley got behind the wheel of her Toyota Rav4 for the first time since breaking her wrist in December and said she was astonished that gas prices had gone up 25 cents a gallon since she was last on the road. Ms. Kelley said she thought there was a direct correlation between the price increases and the mounting talk of conflict.

"With the idea of war looming, prices are not going down," said Ms. Kelley, who commutes 45 minutes each way to work every day to Jackson, Mich.

While some people said they did not want to pay at the pump for war, other consumers were willing to.

"I think the war is probably inevitable and probably necessary, and if higher prices are what we need for more security and safety than I'm willing to pay that," said David Fransko, a stockbroker filling up his Ford Explorer at a Shell station in Ann Arbor.

For some, sacrifice means driving less. In Bothell, a suburb of Seattle, Guy Nguyen and his wife, Diana, both drive to work, he to Bellevue, Wash., and she to Redmond, Wash. They recently returned from a vacation to find much higher gas prices, and decided this week to start sharing one of their two cars; they own a Toyota 4-Runner S.U.V. and a Chevy Tahoe pickup truck, the latter a guzzler with a V-8 engine that gets about 12 miles a gallon on the highway. The more modest Toyota seemed the better choice.

"I've looked everywhere and it's almost two dollars," said Mr. Nguyen, a car salesman, referring to the price of premium gasoline.

AAA reported that the average price of a gallon of regular unleaded gas has increased in Washington State by 18 cents in the past month, to $1.55. In neighboring Idaho, prices for regular have increased nearly 15 cents in the same period, to $1.59 a gallon. "I don't blame the government, I blame the gas companies," Mr. Nguyen said. "They have to find some way to make more profits."

Gasoline station operators are not necessarily happy about the increases, since they tend to strain relationships with customers.

"We got hit with another 4-cent increase yesterday," said Tom Simon, manager of a Union 76 station in Marina del Rey, west of Los Angeles, where full-service, high-octane gas was selling today for $2.29 a gallon. "We're not here for the fast buck, but it just keeps going up."

Paradoxically, Mr. Simon said, sales have risen, as drivers top off their tanks in anticipation of further increases.

"People are still going to buy gas and they're still going to buy S.U.V.'s — at least in this area," he said, pointing to a Ford Expedition and a Cadillac Escalade being filled at the pumps.

"We're all dependent on gasoline — it's like caffeine, or sugar," said Peggy Fisher, a dance teacher who had just spent $16.89 to put almost 10 gallons of the cheapest gas in her Honda Odyssey van. "These are our addictions."

Another customer, a taxi driver, Fred Sam, said he used to be able to fill up his tank for $20. Now, Mr. Sam said, it costs $50.

"At these prices, if you only make $5 or $10 an hour, you keep having to come back and put $5 or $10 worth of gas in the cab," said Mr. Sam, who pays $500 a week to lease his taxi. "I barely break even."

Even people who say that the prospect of a war with Iraq is a pretense to raise prices seem to have adopted an attitude of resignation. Few seemed indignant.

David Elder, a carpenter who was filling up his 1996 Chevy S10 truck on Monday in Charlotte, said he thought the troubles in Venezuela were the main culprit. But if war starts with Iraq, Mr. Elder said, prices "will really go up."

"They are going to get all the money they can out of us," he said.

Thomas Crosby, a spokesman for AAA Carolinas, said the gas price increases were distressing "because the prices are rising at a faster pace than increases in crude oil prices." Oil companies are raising prices on the street well before the prices in crude actually take effect in world markets, he said.

"It's a very typical practice," Mr. Crosby said. "It's a burden on all of us. Iraq gives them a reasonable explanation to offer consumers."

James Dozier, 36, a manager at a janitorial supply warehouse in Charlotte, decided to put just $7 of gasoline in his 1996 Dodge Caravan the other day because of the prices. Mr. Dozier said he also decided not to go out that night to save on fuel costs.

"I'll just stay home and watch television," he said. "It used to be you could put $10 in and go all weekend."

www.fortwayne.com Posted on Wed, Feb. 19, 2003 FABIOLA SANCHEZ Associated Press

CARACAS, Venezuela - The bodies of three dissident Venezuelan soldiers and an opposition activist had bullet wounds and showed signs of torture, forensic police said Wednesday.

Human rights officials warned that a continued impasse between President Hugo Chaves and the opposition demanding early elections could lead to more violence.

All four bodies were found in the suburbs of Caracas with their hands tied and their faces wrapped with tape.

Darwin Arguello, Angel Salas and Felix Pinto and opposition activist Zaida Peraza, 25, had multiple bullet wounds and showed signs of torture, Raul Yepez, the deputy director of Venezuela's forensics police, said at a press conference on Wednesday.

According to the New York-based Human Rights Watch, a witness to the abductions saw the victims being forced into two vehicles by men wearing ski-masks, not far from the plaza that has become the central rallying point of the opposition. Yepez said the abduction took place on Saturday night.

"I don't think anybody should expect the violence to decrease," said Michael Shifter, an analyst at the Inter-American Dialogue think-tank in Washington. "As long as there is an impasse on both sides, if anything, the violence will increase."

Dissident soldiers supported a nationwide strike called Dec. 2 to demand Chavez's resignation or early elections. The strike was lifted Feb. 4 in all areas except the oil industry to protect businesses from bankruptcy.

Chavez's opponents, including other dissident military officers, said government sympathizers could have been responsible for the killings. But Yepez said police had "practically ruled out" political motives.

No arrests have been made in connection with the killings.

Chavez was elected in 1998 and re-elected in 2000. He promised to wipe out the corruption of previous governments and redistribute the country's vast oil wealth to the poor majority.

His critics charge he has mismanaged the economy, tried to grab authoritarian powers and split the country along class lines.

Opponents of Chavez said Wednesday that more than 4.4 million Venezuelans had petitioned for a constitutional amendment to cut Chavez's term in power from six to four years.

Organizers said they had counted and verified 3.7 million signatures collected in a nationwide petition drive on Feb. 2. These were added to another 719,000 signatures supporting the initiative already gathered.

Under the constitution, organizers need signatures from 15 percent, or about 1.8 million, of the country's 12 million registered voters, to force a referendum on the amendment. This would then clear the way for general elections later this year.