www.forbes.com Reuters, 03.04.03, 10:10 AM ET

LONDON, March 4 (Reuters) - OPEC oil ministers plan to discuss output flexibility with six rival exporting nations next week as part of contingency planning in the event of a halt in Iraqi supply, an OPEC official said on Tuesday. Oil prices hit 12-year highs last week near $40 per barrel on fears that any U.S.-led attack on Iraq will disrupt supplies from the Gulf, which supplies about 40 percent of world crude exports. The 11-member Organisation of the Petroleum Exporting Countries, which has recently lifted output to cover for a crippling three-month strike in Venezuela, would struggle to compensate for a total loss of Iraqi exports. "Just in case OPEC cannot compensate for a shortage in the event of war, these countries could do something," a cartel official said. OPEC ministers will meet representatives from Russia, Norway, Mexico, Oman, Syria and Egypt on the morning of March 11, ahead of a formal OPEC meeting in Vienna later on the same day. Many of these countries have participated in recent output restrictions with OPEC, when oil prices were half current levels. The West's energy watchdog, the International Energy Agency, estimated last month that the world had 2.3 million barrels per day (bpd) of spare oil output capacity, mostly in Saudi Arabia, versus latest Iraqi output of 2.5 million. Venezuela is pumping about one million bpd, a third of normal levels, three months after an opposition strike began. Adding to the supply woes, Kuwait said it would have to slash output by up to a third during any war in neighbouring Iraq. Most non-OPEC exporters already pump at full capacity, although Mexico said last month it could increase by 100,000 barrels per day in the event of war. Other countries could increase supply for a short period, known as surge production. If OPEC has insufficient spare output capacity, consumer countries represented by the Paris-based IEA have said they will release crude from their huge emergency strategic reserves for the first time since the 1991 Gulf War. Nascent oil exporters Kazakhstan and Angola, which failed to fulfil previous agreements to curb exports when oil prices fell, have not been invited to the OPEC meeting, the OPEC official said.

santafenewmexican.com Associated Press 03/04/2003 Bernardo Alvarez Herrera, left, Venezuelan ambassador to the United States, speaks Monday at a news conference at the state Capitol. - Jerome T. Nakagawa | The New Mexican enezuela's ambassador to the United States is visiting New Mexico, a trip aimed at creating new economic and cultural ties. Bernardo Alvarez Herrera heads a delegation that met Monday with lawmakers and Gov. Bill Richardson. Meetings are planned later this week with representatives of the oil and gas industry, Los Alamos National Laboratory and the University of New Mexico. The delegation also plans to visit museums and the National Hispanic Cultural Center in Albuquerque. Alvarez said he would talk about issues ranging from possible joint ventures between private-sector energy companies in Venezuela and New Mexico to a swap of art between the state and his country. Heavily Hispanic New Mexico, which has some cultural commonalities with Venezuela, is a natural starting point for strengthening ties with the United States that go beyond its energy relationship, the ambassador told the state Senate. "We would like to build a very friendly and stable relationship between our two nations," Alvarez said. He also reiterated that his nation's oil production is recovering since coming to a virtual standstill in February because of political turmoil and strikes. "Venezuela is coming back to full production," he said. Venezuelan officials said last week in Washington, D.C., that the country was exporting about 1.5 million barrels a day, about half its average daily export last year. Venezuela is the world's fifth-largest oil producer and a major source of oil for the United States, accounting for about 14 percent of U.S. oil imports last year. Venezuela's Ambassador Seeking Closer Ties to N.M. Associated Press 03/04/2003 Bernardo Alvarez Herrera, left, Venezuelan ambassador to the United States, speaks Monday at a news conference at the state Capitol. - Jerome T. Nakagawa | The New Mexican enezuela's ambassador to the United States is visiting New Mexico, a trip aimed at creating new economic and cultural ties. Bernardo Alvarez Herrera heads a delegation that met Monday with lawmakers and Gov. Bill Richardson. Meetings are planned later this week with representatives of the oil and gas industry, Los Alamos National Laboratory and the University of New Mexico. The delegation also plans to visit museums and the National Hispanic Cultural Center in Albuquerque. Alvarez said he would talk about issues ranging from possible joint ventures between private-sector energy companies in Venezuela and New Mexico to a swap of art between the state and his country. Heavily Hispanic New Mexico, which has some cultural commonalities with Venezuela, is a natural starting point for strengthening ties with the United States that go beyond its energy relationship, the ambassador told the state Senate. "We would like to build a very friendly and stable relationship between our two nations," Alvarez said. He also reiterated that his nation's oil production is recovering since coming to a virtual standstill in February because of political turmoil and strikes. "Venezuela is coming back to full production," he said. Venezuelan officials said last week in Washington, D.C., that the country was exporting about 1.5 million barrels a day, about half its average daily export last year. Venezuela is the world's fifth-largest oil producer and a major source of oil for the United States, accounting for about 14 percent of U.S. oil imports last year.

reuters.com Tue March 4, 2003 10:14 AM ET (The following statement was released by the ratings agency)

NEW YORK, March 4 - Standard & Poor's Ratings Services said today it assigned its 'BB' corporate credit rating to General Maritime Corp GMR.N . At the same time, Standard & Poor's assigned its 'B+' senior unsecured debt rating to the company's proposed 10-year $250 million note offering. The long-term rating outlook is stable. New York, N.Y.-based General Maritime is engaged primarily in the ocean transportation of crude oil and petroleum products. The company owns and operates a fleet of 28 oceangoing vessels (23 Aframax tankers and 5 Suezmax vessels).

"Ratings on General Maritime reflect the company's favorable business position as a large operator of midsize Aframax and larger Suezmax petroleum tankers with a strong market share in the Atlantic Basin, diversified customer base of oil companies and governmental agencies, and fairly good access to liquidity," said Standard & Poor's credit analyst Kenneth L. Farer. "These factors are offset by significant, but managed, exposure to the competitive and volatile tanker spot markets and an aggressive growth strategy," the analyst continued.

In January 2003, the company announced it would acquire the 19 vessels owned and operated by Metrostar Management Corp. for $525 million, increasing General Maritime's fleet to 47 vessels (28 Aframax tankers and 19 Suezmax vessels) with capacity equal to about 6% of the world Aframax and Suezmax fleets. The transaction is expected to conclude by April 30, 2003. This acquisition expands General Maritime's scope of operations to Europe, the Mediterranean, and the Black Sea, in addition to increasing the total fleet cargo carrying capacity, with a small decrease in the combined fleet's average age.

Tanker rates increased dramatically in the fourth quarter of 2002, reversing declines during the second half of 2001 and most of 2002, and have remained high, reflecting a cold winter, war premiums associated with a potential conflict with Iraq, and an extension of transit time to supply North America due to the oil company strike in Venezuela. Although rates may moderate from the current high levels, industry fundamentals over the near to intermediate term are expected to remain favorable. Additional rate increases and long-term charter contracts for quality modern tankers are possible due to environmental concerns after the sinking of the tanker Prestige off the coast of Spain. The global Aframax and Suezmax fleets are expected to increase slightly over the next few years, since the delivery schedule represents a somewhat higher percentage of the existing fleet compared with the capacity of ships over 20 years old that will likely be scrapped.

General Maritime's liquidity available under credit facilities and fairly strong market position should enable the company to maintain a credit profile consistent with the rating. Downside risks are limited by the favorable near to intermediate term industry fundamentals and General Maritime's solid market position. However, dramatic improvements are unlikely due to an aggressive growth strategy in a competitive and cyclical market. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www2.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

www.thestreet.com By Steven Smith Staff Reporter 03/04/2003 06:52 AM EST

Oil, oil everywhere: in the news, on people's minds, filling SUVs, heating homes, monopolizing the business section. And yet, so little profit to be had.

Not to sound like reality TV, but the current environment presents the ultimate challenge: Can anyone find a reasonable, defendable, potentially rewarding way to trade in today's environment, without risking the mother of all losses? Options, as always, will give you a fighting chance.

I know my compatriots on this site have done a great job mapping the current oil landscape. My condensed version is that the prospect of war with Iraq has put a $5 to $6 premium on crude prices.

"There is a lot of panic waiting for not necessarily the outcome, but the initiation of a set of events that will lead to a resolution," said Bill O'Grady, an energy analyst with A.G Edwards.

In the last six months, April crude oil futures have jumped 38.5% to nearly $40 a barrel, more than 17% higher than the June oil future price of $33.10.

But O'Grady is quick to point out that fundamentals, such as a cold winter, turmoil in Venezuela, rising natural gas prices and an overhang of uncertainty, will all lead to an inability to quickly replace lost reserves and increase production capacity. "I see a floor on oil prices somewhere above the $29-per-barrel range for the next 18 months," O'Grady concludes. He thinks that's where the equilibrium will be found as war fears dissipate and positive fundamentals underpin the market.

Unfulfilled Potential

Certainly the oil stocks and their proxies are, for whatever reason, acting poorly in the face of rising oil prices.

Exchange-traded offerings, such as Barclay's iShares' Global Energy Index Fund(IXC:NYSE - news - commentary - research - analysis) and the Merrill Holder Trust Oil Services(OIH:NYSE - news - commentary - research - analysis), have also lagged the market. The business fundamentals are beyond the scope of this article and therefore we will discuss oil futures and options as the purest means to position ourselves to profit from the future direction of oil prices.

That brings us back to the top. Conventional wisdom has it that oil prices will drop some 12% to 15%, or $5, once the U.S invades Iraq. So, that means we will be operating under the thesis that front month (as measured by the April futures) has an embedded war premium of about $5 over June. April options volatility is also running at about 50, or about 5 points higher than June. We assume both will narrow and the price of oil will stay above $30 during the next four months.

Let's see if we can take advantage of the price discrepancy in both the underlying oil price and their related options valuations.

The Trade

On Monday, Light Sweet Crude for delivery in April closed at $37.65 on the New York Mercantile Exchange. Based on settlement prices, one could sell the April $35 call for $3.25 and buy the April $37 call for $1.20 -- otherwise known as the bearish vertical call spread -- for a net credit of $2.05. The thesis is that, given recent events, the price of April oil won't go much above $37.05 by April expiration. The table below shows the risk/reward and break-even.

The risk/reward on this may seem great, but remember we are betting that prices will fall once war breaks out. And we are going to couple this position with a bullish June put spread. This is to incorporate the second half of our thesis: that oil prices should have a floor of around $29 over the next four months. It will also help offset an unexpected rise in price and thereby act as a hedge to our April position.

War-Oil Options

Position Value Net Credit/Debit Max Profit at Less Than $35 Break Even at $37.05 Max Loss at Greater Than $38.25 Sell 1 April $35 call $325 $0 ($205) ($325) Buy 1 April $37 call ($120) $0 $5 $0 Net $205 $205 $0 ($325) Source: TSC Research

June futures closed at $32.80. Sell one June $33 put for $3 and buy one June $30 put for $1.50 for a net credit of $1.50. Without going through all the math, the put position in isolation gives you a maximum profit of $150 per spread if the June futures close above $33. The maximum loss is $150, which is realized at or below $28.50.

But when the two positions are combined, that raises your break-even to $38.55 (thanks to the net credit on the put spread), and lowers the break-even in June to $26.45, thanks to the credit in the April call spread.

And the maximum overall profit increases to $355 should the April/June spread narrow $2 to the $33-$35 range.

daily.stanford.edu Dig Deeper By Zachary Haldeman Tuesday, March 4, 2003 last updated March 4, 2003 12:17 AM

Despite President Bush’s claims of moral certainty, he has offered mere platitudes regarding the ethics of attacking Iraq. Not only is an ethical justification necessary, but also it is the single legitimate justification for war.

Why should ethics motivate a decision on war or any other subject? To strive for anything less than the ethical ideal is to compromise one’s values, and to compromise one’s values is to subjugate oneself to the will of others, which is to invite tyranny and mob rule. Without ethics to guide our government in all it does, we are subject to tyranny and mob rule at home and abroad. Thus, the ethical justification for war is the value of freedom.

Most of the world does not understand the value of freedom and why only freedom can justify war.

Many nations stress the necessity of consensus building and multilateralism. However, neither of those involves actually convincing anyone whether war is right or not; instead, consensus-building and multilateralism are praised for their own sake.

According to a recent French memorandum on Iraq, “The unity of the Security Council must be preserved” in order to find a peaceful solution. Why? Is no action right unless everyone agrees with it? And is a peaceful solution necessarily better than anything else?

Unity is good only if it is a consequence of people pursuing the same values and ideals. This is not the case in the Security Council, which has made no ethical case whatsoever. Furthermore, pacifism rewards the most evil people in society. Peace and unity are not unconditionally good.

The ethical norm that should guide nations is freedom. In a social context, freedom consists of individual rights; principally, the right to live, which is the source of all other rights. The right to live is the right to act in accordance with one’s judgment and values, so long as that does not impose upon others any obligation except the obligation not to initiate the threat or use force.

Individual rights are a uniquely American ideal. America was the first nation in which citizens were not servants of a god or a king or the state; instead, Americans established the government in order to secure freedom by protecting the rights to life, liberty, property and the pursuit of happiness. In practice, Americans violated all of these rights from the very beginning, and even today our rights are in dire straits, but the ideal of freedom remains all-important.

A government is legitimate only if granted its power by free people. People who do not enjoy freedom are not able to give consent to their government. Nations that neither uphold nor even grant any rights cannot claim a right to non-interference. That opens the door for some action against Iraq, but when is war justified?

The threat and use of force is justified only when in defense of freedom. If America still intends to uphold freedom through individual rights, then we have the right to take any action appropriate to defend ourselves from those who threaten us with force.

In all of this talk about respecting freedom and individual rights, isn’t there a contradiction in violating the rights of foreigners with American military action? Is an American life worth more than an Iraqi life? No, any life is self-valued. Your life is what you make of it.

If you place no value on your life, and you allow dictatorial regimes to control you, then you are responsible for the consequences of that. Thus, those Iraqis who tolerate an oppressive and deadly regime are responsible for defensive strikes by free nations, and in such a strike, the Iraqi regime is solely responsible for the deaths of those Iraqis who resisted the freedom-hating Iraqis.

Your government is not a separate entity: You are responsible for it. You are responsible for changing it or dissociating from it if it threatens to violate individual rights to life, liberty, property and the pursuit of happiness.

In contrast, the United States of America is not the liberator of the oppressed, and it has no duty or ability to be such.

The United States might find it in its own interest fight a war to end an evil regime, but we can never force anyone to be free. Both liberated and oppressed people must recognize the value of individual rights for themselves.

If some peoples continually produce oppressive regimes, hostile to freedom at home and abroad, then America should defeat them time and time again until they learn for themselves to respect individual rights.

We should do all that we can to support those who demand these rights from their governments, including the students in Iran and the strikers in Venezuela. We cannot force freedom upon anyone, but we should assist those who are working for it already.

Do not let our own government take away the very freedom it is supposed to protect (e.g., through the Patriot Act or through compromises with freedom-hating nations). Reclaim your rights to life, liberty, property and the pursuit of happiness. Reclaim your freedom, even if that means war.

Zachary Haldeman is a senior majoring in mathematics. You can reach him at haldeman@stanford.edu.