www.springfieldnewssun.com Dow Jones News Service

NEW YORK (Dow Jones News)--Crude oil futures rallied Tuesday, staging a sharp recovery after three straight sessions of declines on hopes that a war with Iraq could be averted.

Between Thursday and Monday, prices fell sharply as Iraq's increased cooperation with U.N. weapons inspectors and Turkey's rejection of access to U.S. troops sparked speculation that a U.S.-led attack on Iraq could be avoided, or at least delayed by several weeks.

But prices turned around Tuesday as the U.S. stepped up military preparations for a possible war and indicated it would seek U.N. Security Council approval of a resolution on military action next week, analysts said.

At the New York Mercantile Exchange, April crude oil futures rose $1.01 to end at $36.89 a barrel after rising as high as $37.18 intraday.

April heating oil futures ended up 1.26 cent at $1.0486 a gallon, while April gasoline futures climbed 1.74 cent to settle at $1.1122 a gallon.

At London's International Petroleum Exchange, April Brent futures rose 61 cents to close at $33.09 a barrel.

Natural gas for April delivery retreated 12.1 cents to settle at $7.041 per 1,000 cubic feet.

American officials, dismissing Iraq's destruction of its short-range Al Samoud 2 missiles as inadequate and insincere, pressed ahead for a final confrontation.

Military forces continued to mass in the Persian Gulf, with the United States deploying an additional 60,000 troops to the region atop the 230,000 troops already there. Turkey is also debating whether to resubmit a parliamentary motion to allow more than 60,000 U.S. troops to use the country as a northern front against Iraq.

At the same time, officials said they plan to bring to a vote next week a Security Council resolution authorizing military action against Iraq.

The measure, backed by Great Britain and Spain, faces stiff opposition from Security Council members, with Russia's foreign minister Igor Ivanov issuing a veiled threat to veto it.

But a White House spokesman said the United States believes it has the nine votes necessary to pass the resolution, though he left open the possibility that the United States might withdraw the resolution if it concludes it would not pass.

Regardless of the outcome of a vote, the United States says it's prepared to press ahead with an attack, barring an 11th-hour decision by Iraq to give up its weapons of mass destruction.

U.S. officials say there is virtually nothing Iraq could do to convince them that it is serious about disarming. In a speech Tuesday, President Bush reiterated his determination to see Iraq stripped of its weapons of mass destruction.

Energy traders worry that an attack on Iraq could disrupt the flow of oil from the Persian Gulf.

Meanwhile, OPEC and non-OPEC oil ministers will meet next week to discuss what they could do in the event of a war in Iraq, an official from the Organization of Petroleum Exporting Countries said.

OPEC countries have increased production in recent months in response to a strike in Venezuela and soaring oil prices. According to a Dow Jones Newswires survey, OPEC crude oil output jumped by 1.43 million barrels a day to 27.091 million barrels a day in February from January.

quotes.freerealtime.com

Mar 04, 2003 (ODJ Select via COMTEX) -- Here is a summary of Dow Jones Newswires coverage of the general strike in Venezuela, including the status of oil operations, political developments, and reaction of the oil market. Full stories can be found by searching R/VE.

TOP NEWS

PdVSA Paraguana Refinery Can't Restart Cat Cracking Unit

Venezuela's state-owned oil monopoly Petroleos de Venezuela (E.PVZ), or PdVSA, over the weekend failed to restart one of its catalytic cracking units at the massive Paraguana refinery complex, a PdVSA spokesman said Monday. Due to acts of sabotage and troubles to establish a stable natural gas feed, one of the catalytic cracking units at the Amuay plant that should help achieve a production of around 140,000 barrels per day of gasoline couldn't be started up, the PdVSA spokesman said.

Venezuela Feb CPI Soars To 5.5%, Highest in 7 Yrs

Venezuelan consumer prices soared in February up to its highest level in seven years by 5.5%, up from 2.9% the previous month, the Central Bank said in its monthly report over the weekend. The price increase was significantly higher than February last year when inflation stood at 1.8%. Accumulated inflation for the year 2003 stands at 8.4%, the Bank reported. Price controls on certain products pushed prices higher while expectations of a new currency control regime of which details are to be announced this week were among the main reasons for the jump, the bank said.

Chavez: $30/Bbl Venezuelan Oil Basket Price 'Perfect'

Venezuela's President Hugo Chavez on Friday celebrated the current spike in world oil prices and said that the price of around $30 a barrel for the nation's oil basket of crude and refined products is "perfect." "The current price is really very good...I think $30 a barrel is a fair and just price," Chavez said, speaking at the state-run television network while visiting an electricity utility in Bolivar State. Venezuela's oil basket closed at $30.90 Friday and is trading some $5 below West Texas Intermediate, WTI, and almost $4 below Brent. World oil prices are hovering around $35 a barrel on fears a possible U.S.-led war in Iraq could cause a disruption of Mideast oil. Chavez didn't say what the Organization of Petroleum Exporting Countries should do at its meeting March 11 in Vienna. The possible intervention in Iraq is seen around that time and is hampering OPEC's ability to respond and ease world oil prices.

Venezuela May Adjust Avg Price Oil Basket 2003 - Report

The Venezuelan government may adjust the 2003 targeted average of $18 a barrel for its basket of crude oil and refined products, El Nacional reported Friday. A final decision to hike the average target price to $20 or $22 a barrel on which the nation's federal budget is based has to wait until the end of March, El Nacional reported, citing a government study. That is because of the possibility of a U.S.-led intervention in Iraq sometime in March, which could affect world oil markets seriously. Also, by then the recovery of the oil industry should be complete after a strike at the nation's oil behemoth Petroleos de Venezuela SA (E.PVZ).

Venezuela Crude Production At 1.58M B/D - Ex-PdVSA Staff

Crude production at Venezuela's state-owned oil monopoly Petroleos de Venezuela SA (E.PVZ) currently stands at 1.58 million barrels a day, former staff of PdVSA said in a daily report late Thursday. However, Venezuela's Oil Minister Rafael Ramirez told reporters in Washington Thursday crude oil production has risen to 2.08 million b/d from 150,000 b/d in early January when widespread worker protests and walkouts paralyzed the PdVSA. Production is likely to reach 2.7 million b/d by mid-March and 2.9 million b/d by the end of March, he said.

Venezuela Strike Damage Seen At $7.6 Bln - Report

The nationwide strike in Venezuela that lasted two months and crippled the vital oil industry has cost the nation $7.6 billion due to lost economic production and fiscal contribution, the local daily El Nacional reported Friday. Total loss of production in the economy caused by the strike is estimated at $6.2 billion of which $2.7 billion comes from the oil sector and $3.5 billion from the non-oil sector, El Nacional reported, citing a report of the Finance Ministry. Added to that is a loss of $1.4 billion in fiscal income for the state, El Nacional said. The Finance Ministry couldn't be reached for additional comment. The damage caused by the strike is seen as long-term and severe, the report said.

SPECIAL REPORTS

Burning Across World Economy Energy Prices Hamper Growth

Almost 30 years after an energy crisis was blamed for the lights on the U.S. national Christmas tree staying off, rampaging oil and gas prices are once again eating into consumption and growth across the global economy. The 77% leap in energy prices over the past year hasn't yet sparked the alarm seen in 1973, when customers experienced electricity blackouts even before the Organization of Petroleum Exporting Countries imposed an oil embargo that pushed prices to levels previously thought impossible. But the rally in the price of oil, natural gas and a host of energy products has raised a slew of concerns about the longer-term repercussions for global growth. Some economists believe a sustained period of higher prices could tip the U.S. and other major economies back into recession.

OIL MARKET REACTION

Crude oil futures rallied Tuesday, staging a sharp recovery after three straight sessions of declines on hopes that a war with Iraq could be averted. Between Thursday and Monday, prices fell sharply as Iraq's increased cooperation with U.N. weapons inspectors and Turkey's rejection of access to U.S. troops sparked speculation that a U.S.-led attack on Iraq could be staved off or at least delayed by several weeks. But prices turned around Tuesday as the U.S. stepped up military preparations for a possible war and indicated it would seek the United Nations Security Council approval of a resolution on military action next week, analysts said. "The market had false perceptions of peace yesterday," an analyst said. "People were thinking that somehow Saddam Hussein's destroying the missiles and the lack of the Turkey vote would end the war." At the New York Mercantile Exchange, the nearby April crude oil futures rose $1.01 to end at $36.89 a barrel after rising as high as $37.18 intraday. At 2108 GMT, the April contract is 2 cents higher at $36.91 in overnight trade.

-By Beth Heinsohn, Dow Jones Newswires; 201-938-4435; beth.heinsohn@dowjones.com

www.news24.com 03/03/2003 08:14  - (SA)  

Washington - The United States is using trade interests as leverage in its diplomatic efforts to persuade certain United Nations members to vote for a new resolution at the security council to allow military strikes against Iraq.

Two of those nations, Mexico and Chile, both non-permanent members of the 15-nation security council, are in an awkward position as a result, experts say.

Mexico forms part of the North American Free Trade Agreement and is America's second most-important partner with trade worth $232bn (about R1 898bn) a year.

Chile is set to seal a free-trade accord with Washington to eliminate customs tariffs on industrial and agricultural produce within 12 years.

Ambler Moss, director of the Dante B Fascell North-South Centre, a policy research institute at the University of Miami, said: "Both Mexico and Chile are in an extremely difficult and vulnerable situation right now."

The two nations are also negotiating a pan-American Free Trade Area of the Americas scheduled to get off the ground in 2005.

A good personal relationship between Mexico's President Vicente Fox and President George W Bush has lost some of its glow in recent months.

Special envoy sent to Chile

Now, Latin America has returned to the back-burner at the White House with the fight against terrorism and the prospect of war on Iraq being more-pressing issues.

The United States, Britain and Spain, which have put forward a second resolution on Iraq to the United Nations, need six more votes - nine in all - to ensure it is passed.

France, Russia and China from the five permanent security council members - the other two being the United States, Britain - could veto it since they support a separate move to extend weapons inspections in Iraq.

The other security council non-permanent members are Germany, Angola, Bulgaria, Cameroon, Spain, Guinea, Pakistan and Syria.

On Friday, Washington sent a special envoy for Latin America, Otto Reich, to Chile to try to secure the South American nation's vote.

Chilean President Ricardo Lagos said after meeting Reich that Chile was waiting for the five permanent council members to make a decision, since "it is not for certain major countries to abstain, which would force us, the smaller countries, to make the decision".

"What they (Mexico and Chile) might do is to sacrifice their own political considerations because the immense majority of people in their countries are against the war and against supporting the United States in this thing for expediency."

The position of Angola is more difficult still.

The southern African nation has been trying to join up to the African Growth and Opportunity Act to allow it improved access to the US marketplace in certain areas of commercial activity to the 38-nation members, including Cameroon and Guinea.

Angola itself has a need to capitalise on its oil resources and thus seeks to attract US oil company investors.

Walter Kansteiner, US assistant secretary of state for Africa, visited Luanda last week to meet Angolan President José Eduardo dos Santos, who also received a phone call from Bush. - Sapa-AFP

onebusiness.nzoom.com

Looming war in Iraq and a Venezuelan workers' strike have stolen the headlines in the build toward $US40 oil, but it is a decade-long shrinkage of the US energy industry that underlies the soaring price.

As energy companies bid to improve profit margins by cutting costs, oil and natural gas drillers are pumping less supply from the US mainland, while unprofitable refiners have closed plants and drained storage tanks, analysts said.

The result: a US energy supply system that finds it increasing vulnerable to supply shocks, leaving fuel consumers at home and abroad more exposed to sudden price rises.

"The oil industry has been generally underinvested in last 20 years ... so what happens is if we get into a situation where we get a hiccup in the oil balance and you get these very leveraged affects on price," said Mike Rothman, analyst at Merrill Lynch bank.

The US supply shortage has undercut the ability of the Opec oil producer cartel -- itself now bumping up against production capacity limits -- to keep oil price rises under control. Opec meets next week to decide policy in the event of war in Iraq.

US oil companies keep on hand about 1 billion barrels of spare supply of crude oil and oil products like gasoline, worth tens of billions of dollars. But when oil prices drop, the cost to refiners can be overwhelming, as inventory on hand loses value.

Plagued by poor profits for much of the 1990s, US oil refiners increasingly used computer software to manage inventories more efficiently and whittle down the stock cushion they keep on hand. The shift gained pace in the Internet boom.

"If refiners wanted to maintain share price in an environment of high tech stocks they're going to do everything to cut costs," said Sarah Emerson, director of Boston-based Energy Security Analysis Inc (ESAI).

Low stocks, high prices

From February 1993 to this year commercial crude inventories have fallen 18% and now stand at the lowest level since 1975, according to government figures. The lack of oil last week pushed crude prices to within a penny of hitting $US40 for the first time in 12 years.

"Throughout the US energy industry, assets and activity have been undervalued by markets," said Paul Horsnell of J.P, Morgan bank.

This winter the slow inventory evaporation has been accelerated by a anti-government Venezuelan strike that has chopped oil exports of the world's former No. 5 supplier by one-third, or 1 million barrels per day (bpd).

UScrude stocks have dropped to the minimum 270 million-barrel level the government says is needed to keep supplies flowing smoothly -- just as the international oil system braces for war in Iraq, which ships around 4% of world crude exports.

The sheer size of the energy needs of the United States -- which consumes a quarter of the world's oil and imports 60 percent of its fuel -- means higher U.S. prices ripple through to Europe and Asia, even though supplies there are not nearly as tight.

"The United States has probably been the most active (nation) in terms of moving toward a lower average level of inventories for petroleum," said Dave Costello economist at the federal Energy Information Administration (EIA).

Winter woes

A long, cold winter has pulled US heating oil stocks to their lowest levels in nearly three years. Gasoline stocks, which should soon be building for summer driving demand, are 11% lower than last year.

Supplies have now fallen to dangerous levels, said Matthew Simmons, oil consultant with Simmons and Co, in Houston. "We got here over a decade, as a result it's going to take long time to figure out how we get out of this hole," said Simmons.

Cost-conscious companies' reluctance to drill for new supplies has also helped press prices for natural gas -- a rival heating and industrial fuel -- to all-time highs for the second time in three winters.

"This is not the sign of a market that is either working well or playing a constructive role in the US economy," said JP Morgan's Horsnell.

And as companies curb spending, US oil reservoirs on the mainland are drying up. From 1990 to 2002 domestic crude production has fallen more than 20% to 5.82 million barrels daily.

"The effort to produce has gone elsewhere, to the former Soviet Union and West Africa as well as Mexico," said the EIA's Costello.

The current structure of oil futures -- in which later months are greatly discounted to current prices as traders bet the prices will fall after a US victory in Iraq -- gives no incentive for companies to start storing more.

"Right now there's no reason at all for any refiner to put anything into a tank." said ESAI's Emerson. "Do you want to buy $37 a barrel crude and sell it at $25 in two or three months?"

Source: Reuters

biz.yahoo.com Tuesday March 4, 4:41 pm ET

WASHINGTON, March 4 (Reuters) - In a move to keep more oil in the U.S. market amid high crude prices, the Energy Department said on Tuesday it will allow oil companies to defer delivering 3.5 million barrels of crude supposed to be shipped to the Strategic Petroleum Reserve during April.

The department's decision will keep more oil in the market as U.S. crude inventories are low and oil prices remain high because of fears of a war with Iraq and a disruption in Venezuelan crude exports due to a workers strike.

Oil companies have until April 2004 to deliver the deferred crude, plus additional barrels as interested.

The emergency stockpile will still receive a shipment of 400,000 barrels of oil already scheduled for next month, a department spokesman said.

The crude bound for the reserve comes from oil companies that turn over the oil to the government as royalty payments for drilling on federal leases. Energy firms normally pay cash royalties on the crude they find.

The Bush administration has suspended about 18.5 million barrels in royalty-in-kind oil shipments since mid-December that were bound for the emergency reserve.

The stockpile was created by Congress in the mid 1970s after the Arab oil embargo and currently holds 599 million barrel of crude in a series of underground salt caverns at four sites in Texas and Louisiana.

The administration plans to fill the reserve to its capacity of 700 million barrels by the end of 2005.