www.canada.com Canadian Press Monday, March 10, 2003

TORONTO (CP) - Overseas stock markets were down and Wall Street index futures were weak Monday, on the third anniversary of the peak of the technology-stock craze and a week before the March 17 deadline envisioned by the United States in a proposed United Nations ultimatum to Iraq.

American State Secretary Colin Powell said he is close to rounding up the votes for the disarmament deadline, and warned that a French veto would have "a serious effect on bilateral relations."

European stock markets were down, on war worries and after Deutsche Telekom reported the worst corporate loss in European history.

Europe's largest telecommunications company said Monday it lost 24.6 billion euros ($27.1 billion US) in 2002. The net loss was largely on writedowns of such holdings as wireless company T-Mobile USA, but chief executive Kai-Uwe Ricke acknowledged: "There is no way to put a good face on it."

The Deutsche Telekom loss - reported on the third anniversary of the Nasdaq's technology-bubble peak - exceeded the records set last week by France Telecom, at 20.7 billion euros, immediately overshadowed by Vivendi Universal, which lost 23.3 billion euros last year.

The German DAX index was down 1.7 per cent early in the afternoon. The Paris CAC-40 declined 0.8 per cent, while London's FT-SE 100 index was little changed, slipping 3.4 points to 3,488.2

Asian stocks closed down. The key Nikkei index in Tokyo fell to a new 20-year low, down 101.86 points, or 1.25 per cent, to 8,042.26, led down by banks.

The Hong Kong Hang Seng index declined 45.23 points to 8,861.87.

South Korea's main index closed 0.33 per cent lower after North Korea test-fired a missile into the sea in what was seen as a move to raise tensions further over its nuclear programs.

The Canadian dollar was trading at 68.37 cents US, up 0.13 cent from Friday's 32½-month high, after gaining 0.85 cent last week.

The currency got an additional boost Monday morning as Canada Mortgage and Housing Corp. reported that housing starts last month were up 34.5 per cent over the January level.

The euro was solidly above its four-year highs of $1.10 US, while the yen strengthened to 116.5 to the American dollar amid fears that war will wound the already shaky American economy.

In Canadian corporate news, business software maker Cognos has announced an alliance with the Giuliani Group, a consulting firm headed by former New York mayor Rudolph Giuliani.

Canada's largest pension-fund manager, the Caisse de depot et placement du Quebec, reports Monday on what is believed to have been a bad year. Reports say the Caisse lost more than $2 billion on telecommunications investments last year, mostly on cable company Videotron.

Analysts suggest the fund lost $10 billion in 2002, out of $133 billion in assets. The fund's report precedes an expected election call by Premier Bernard Landry.

Talisman Energy has completed its retreat from Sudan, with the sale of its 25 per cent interest in the Greater Nile oil project to Indian state-owned company ONGC Videsh for about $1.2 billion. The sale, announced last October, dragged on for more than two months after the original closing date of the end of 2002.

Delegates of the Organization of Petroleum Exporting Counties are gathering in Vienna for a meeting Tuesday to discuss production. Observers see little that OPEC can do to hold down oil prices - at 12-year highs - in the face of looming war in Iraq and continuing production problems in Venezuela.

"For once OPEC is in the back seat, looking out the window," said Leo Drollas, economist at the Center for Global Energy Studies in London. "The U.S. is in the front seat, driving the war wagon."

North American stock markets had an up day Friday at the end of a down week.

Toronto's S&P/TSX index edged up 31.26 points to 6,359.86 - down three per cent on the week.

The Dow Jones industrial average gained 66.04 points to 7,740.03, up from Thursday's five-month low but down 151 points on the week.

The Nasdaq - ahead of Monday's third anniversary of its peak at 5,131.52 - was up 2.40 points to 1,305.29. The S&P 500 was ahead 6.79 at 828.89.

"The international political uncertainties continue to weigh on both the economy and the markets, making it difficult for decision-makers to make long-term commitments," said Edgar Peters, chief investment officer at PanAgora Asset Management in New York.

"The economy can only wait so long for political issues to be resolved before real deterioration begins."

www.alertnet.org 10 Mar 2003 13:00 By Alistair Scrutton

CARACAS, Venezuela, March 10 (Reuters) - They disrupted Christmas. They froze Venezuela's oil lifeblood. They marched in their millions.

To little avail.

Vast numbers of Venezuelans who failed to force out leftist President Hugo Chavez with a huge strike are now in limbo. They are wondering what do to next and fearful of what may come as the nation, split along economic class and political fault lines, falls deeper in recession.

"Depressed isn't the word for it. I'm totally crushed," said Maria Jose Alonso, a brooding, out-of-work pharmacist who chatted in a restaurant about the two-month strike that petered out early last month. "Now Chavez is on the offensive."

Chavez, a former paratrooper who survived a bungled coup in April last year, took on and defeated the strike which slashed oil output in the world's No. 5 petroleum producer.

He has called his foes "oligarchs" out to destroy his self-styled "revolution" to help the poor.

"We thought the strike would push Chavez out in a week, ten days at most," Alonso said, flashing ten fingers in the air.

In December, she took part in demonstrations for the first time ever. Like many Venezuelans across the country, she spent Christmas banging pots and pans to protest against Chavez and to call for early elections.

Alonso's pessimism reflects a mood swing among the middle and upper classes, the backbone of the opposition whose marches often ended in street battles with Chavez's mainly poor supporters.

Trip wires still lie ahead -- from opposition calls for a referendum to fears the government could take over private TV stations -- that could spark further civil unrest. But many of Chavez's foes are soul-searching.

OPPOSITION IN DISARRAY

"There's disarray. The opposition aren't weaker in the sense they can still mobilize a lot of people. But most agree mobilizations are not the way," said Caracas-based political analyst Janet Kelly. "The debate is over what to do now."

Resigned, scared and depressed are some of the words Chavez' opponents use to describe their reaction to the fact that the president, whom they see as a power-hungry class warrior trying to turn Venezuela into a Cuba-style communist state, is still leading the country.

"Two months ago we were optimistic. Now it's all just so uncertain," said Tom Bokor, a systems auditor at the PVDSA state oil firm who was fired after he went on strike. He now supports his wife and three children with his savings.

Several million Venezuelans have participated in dozens of huge opposition marches over the last year. But polls show that the populist president could still win an election with around 30 percent support, if the opposition vote remained divided between anti-Chavez leaders.

Opponents fear a government counter-attack. Chavez has fired more than 15,000 striking state oil workers, and authorities have arrested businessman Carlos Fernandez, a strike leader, on rebellion charges. Detention orders have also been issued for several other strike organizers.

Unexplained bombs at Colombia and Spanish diplomatic buildings on Feb. 25 sparked fears of an upsurge in political violence.

"Maybe the only way out is flying to Miami but now I can't even buy dollars. I'm trapped," Alonso added, referring to currency controls introduced in February by Chavez to curb what he called the "dolce vita" of the rich.

PEOPLE MUST MAKE A LIVING

Caracas, a sprawling city nestled in lush mountains, is returning to the normalcy of chaotic Latin American capitals. Streets empty during the strike have filled up again with snarling traffic. Once-closed restaurants are busy, surrounded by gleaming sports utility vehicles tended by security guards.

Demonstrations are smaller now. One recent Sunday, protesters on gleaming motorbikes and draped in flags rode through a wealthy business district, but they numbered only a few hundred. Only several thousand people protested Fernandez' arrest.

"A lot of the opposition are shellshocked. They fired their biggest artillery and missed. They underestimated Chavez and now they're marched out," said one European diplomat.

Private TV stations, some of Chavez's most vocal opponents, still broadcast spots show flag-waving protesters calling for liberty and urging Venezuelans to keep up the fight against the president. But the images have little resonance on the streets.

Ice cream vendors outnumber visitors at the posh east Caracas Altamira square, a few months ago a hub of resistance to Chavez that teemed with students, office workers, military officers and housewives who gathered daily to protest.

"People have to make a living, you know, now the strike has ended," said Leonora Acevedo, a university teacher who has been protesting in the square for four months. She sat alone.

The opposition umbrella group, Coordinadora Democratica, is an alliance of interest groups ranging from unions and civic groups to a business federation. Their divided aims range from throwing out Chavez with military help to having a referendum,

"We need to refresh the movement," said Miranda State governor Enrique Mendoza, an opposition leader.

WAIT AND SEE

Meanwhile Caracas is in wait-and-see mode. Its inhabitants still talk about latent class hatred between the poor western and posh eastern halves of a city that may explode in unrest. Rich districts store arms and chains to mount barricades.

Chavez-loyal soldiers have confiscated the heavy weapons of the opposition-run Caracas metropolitan police. Soldiers stand guard outside police stations.

Downtown Caracas is a Chavez stronghold of street peddlers, run-down buildings, graffiti and garbage. The presidential palace is a heavily guarded mansion surrounded by troops and road blocks. But nearby his supporters seem confident.

"The people are with Chavez. They know he's fighting the rich who are responsible for all this mess," said Antonio Lopez, selling children's toys on a street corner.

A few miles away to the east the atmosphere is different.

"Don't Despair" reads one banner on the windows of an expensive dried flower shop in an upmarket Caracas mall.

"We feel hemmed in now," said Flor, a retired woman who said she was too worried about recriminations to give her full name. She strolled by the flower shop, her neck laden with jewelry. "But don't count us out. We'll be back."

www.businesswire.com LONDON--(BUSINESS WIRE)--March 10, 2003--

Cartel's ability to meet demand could be 'sorely tested'     OPEC's eleven members, including Iraq, pumped 27.03-mil b/d in February, 1.32-mil b/d up on January's 25.71-mil b/d, a Platts survey of OPEC and oil industry officials showed March 7.     Platts is the energy information, research, consulting, and marketing services unit of The McGraw-Hill Companies (NYSE: MHP).     Excluding Iraq, the ten members with quotas pumped 24.52-mil b/d over the month, pushing production up by 1.31-mil b/d from their January level of 23.21-mil b/d to meet their collective 24.5-mil b/d ceiling, which came into effect at the beginning of February, the survey showed.     Venezuela, recovering from an oil strike that reduced its production from 2.9-mil b/d in November to as little as 650,000 b/d in January, accounted for more than 60% of the additional production as it averaged 1.49-mil b/d in February.     With a possible war in Iraq looming, oil markets are focused on OPEC's ability to meet a potential supply shortage if Iraqi exports are halted.     "It seems that OPEC will be able to cover any loss of Iraqi supply in the event of a war. But the latest rise in the group's production suggests that if oil production and exports are disrupted in other countries, OPEC's ability to ensure markets are adequately supplied will be sorely tested," said John Kingston, Global Director of Oil for Platts.     Saudi Arabia holds the largest volume of spare output capacity, but this is shrinking as the Kingdom raises output. Some analysts believe Saudi production is currently close to 9-mil b/d.     Saudi oil minister Ali Naimi said late last month that Riyadh was pumping around 8-mil b/d, close to its OPEC quota and 2.5-mil b/d less than its total output capacity of 10.5-mil b/d.     Naimi said in January that Saudi production could be raised to close to 10-mil b/d within two weeks. Reaching the full 10.5-mil b/d would take 90 days, he said. Based on the Platts production estimate of 8.74-mil b/d for February, Riyadh's immediately available spare capacity is therefore less than 1.3-mil b/d.     Platts soundings among OPEC delegates, industry officials and analysts suggest that Iran, the UAE, Libya, Qatar, Nigeria and Algeria could between them push out an additional 900,000 b/d or so. This would put OPEC's spare capacity at just under 2.2-mil b/d.     Saudi Arabia, which raised output by 450,000 b/d in January, pushed out a further 270,000 b/d in February to average 8.74-mil b/d, the country's highest output level since December 2000.     Despite two increases in OPEC's nominal output ceiling totaling 2.8-mil b/d this year, OPEC's crude basket has been above the cartel's $22-28/bbl target band since mid-December. It stood at $32.50/bbl Feb 6.     Country-by-country breakdown of production with figures in millions of b/d:

Country Feb 03 Jan 03 Dec 02 Jan 03 Feb 03 Quota Quota

Algeria 1.050 1.020 1.000 0.735 0.782

Indonesia 1.080 1.080 1.080 1.192 1.270

Iran 3.690 3.620 3.550 3.377 3.597

Iraq 2.510 2.500 2.360 N/A N/A

Kuwait 2.000 2.000 1.980 1.845 1.966

Libya 1.400 1.390 1.350 1.232 1.312

Nigeria 2.180 2.150 2.100 1.894 2.018

Qatar 0.750 0.730 0.720 0.596 0.635

Saudi Arabia 8.740 8.470 8.020 7.476 7.963

UAE 2.140 2.100 2.050 2.007 2.138

Venezuela 1.490 0.650 1.000 2.647 2.819

Total 27.030 25.710 25.210

OPEC 10 (excluding IRAQ)24.520 23.210 22.850 23.000 24.500

    For more information on OPEC, go to the "Platts Guide to OPEC" at www.platts.com/opec/index.shtml

    Platts is the global leader in providing energy information and marketing services. Every day, more than $10 billion of trading activity and term contract sales is based on Platts' price assessments. From 14 offices worldwide, Platts covers the oil, natural gas, electricity, nuclear power, coal, petrochemical and metals markets. Additional information on Platts real-time and Internet-based news and price assessment services, publications, databases, geo-spatial tools, conferences, research and consulting services and energy financial services is available at www.platts.com and www.plattsmetals.com.

    Founded in 1888, The McGraw-Hill Companies is a global information services provider meeting worldwide needs in the financial services, education and business information markets through leading brands such as Standard & Poor's, BusinessWeek and McGraw-Hill Education. The Corporation has more than 350 offices in 33 countries. Sales in 2001 were $4.6 billion. Additional information is available at www.mcgraw-hill.com.

--30--TAV/ny*

CONTACT: Platts
         Jim Keener, +1 (720) 548-5624 
         james_keener@platts.com
         or
         RF Binder Partners
         Janine Lang, +1 (212) 994-7525   
         janine.lang@rfbinder.com

KEYWORD: NEW YORK
INDUSTRY KEYWORD: ENERGY OIL/GAS PUBLISHING ADVERTISING/MARKETING
SOURCE: Platts

www.oregonlive.com 03/10/03 BRENT HUNSBERGER

Mad Dog Trucking's David Hutchison turned to friends last week to fix his semitrailer's leaky radiator. Try Our Classifieds

Louisiana-Pacific warned investors late last month of lower profits this spring.

Blue Heron Paper shut down two of three paper machines and sent a third of its workers home in late February.

All three Oregon companies made these moves to cope with the same demon: spiking energy prices.

In the past two weeks, West Coast diesel prices have neared an all-time high, spot electricity prices have more than doubled what they were a month ago, and natural gas prices have soared to three times above normal.

The trend has meant trouble for Oregon truckers, timber producers, food processors and other power-intensive industries that buy power on short-term markets. Such unexpected essential costs are hard enough for commodity manufacturers to manage in normal times. They become even more dangerous as the state's industries struggle to pull out of a long recession.

And if prices stay high into summer, as some predict, they could mean higher energy bills for everyone -- businesses, schools, government and homeowners -- and a big drain on Oregon's economic recovery. The state's latest revenue forecast cites rising regional energy prices as a major risk for more layoffs and production slowdowns.

"I don't think the hikes are at the point where it would actually throw us back into a recession," state economist Tom Potiosky said. "But it makes the recovery that much more difficult."

Roy Hemmingway, chairman of the Oregon Public Utility Commission, said he has "absolutely no doubt" that high energy costs have had a significant impact on the state's economy.

Portland General Electric's 2001 increase alone, which raised rates by 30 percent for households and 50 percent for businesses, drained $400 million from the economy, he said.

"That's $400 million that otherwise would have been available for other things," he said.

Utilities said they are trying to hedge against passing on heightened costs to residential and commercial ratepayers. PGE is taking advantage of the high prices by selling excess power on the market, said Jim Lobdell, the utility's vice president of power operations.

Northwest Natural Gas spokesman Steven Sechrist said the Portland-based utility is not paying high spot prices because it bought its current gas supply last year, when prices were lower.

Customers of other utilities aren't as lucky. Last week, Puget Sound Energy, which provides natural gas to more than 600,000 users in Washington, asked state regulators for a rate adjustment to recover soaring gas costs, potentially adding an average of $10 to residential bills. Bonneville Power Administration, which markets power from the region's 31 hydropower dams and nuclear plants, has proposed a 15 percent wholesale rate increase this fall.

The recent dramatic price increases have been fueled by an unusual mix of war fears in the Middle East, labor strife in oil-producing Venezuela, harsh winter weather in the Eastern and Midwestern United States and inadequate levels of natural-gas storage and drilling rigs.

To meet high winter demand, oil refineries switched from making diesel to producing heating oil, crimping diesel supplies and boosting prices at the pump. Crude oil inventories in the United States, meanwhile, have tumbled to 25-year lows, analysts said.

Winter weather also boosted demand for natural gas, depleting the nation's underground reserves to low levels. Higher gas prices, in turn, helped push electricity prices up, since natural gas can be a raw material for electricity production. One quarter of PGE's electricity comes from natural-gas-fired plants.

Looking ahead, another wild card in the Northwest lies buried beneath the light mountain snowpack. Even if usual spring rains arrive, the Columbia River runoff will be 70 percent of normal, federal forecasters said Friday. That means less water will churn dam turbines. With a shortage of cheap hydropower, the region might have to rely more on pricier sources of electricity this summer.

One manufacturer hard hit by the energy-price spikes of the past two weeks was Blue Heron Paper in Oregon City. The mill, partly employee-owned, furloughed 80 workers and idled two small paper machines on Feb. 28, three days after spot energy prices soared to $116 per megawatt hour. That's far above the Jan. 6 price of $35.42. Prices remained above $70 last week, but the company restarted one paper machine and called back 30 workers, President Mike Siebers said.

Across the Willamette River from Blue Heron, West Linn Paper's monthly energy costs have risen $250,000 since October. The mill is in better shape than Blue Heron because it buys natural gas month by month, instead of daily. Still, the company is instituting conservation measures and using more heating oil to fire its pulp boilers, mill manager Brian Konen said.

SP Newsprint shut down half its Newberg mill for a day when electricity surged above $100. But a hedge agreement that fixes most of the mill's energy costs for six months has helped blunt the impact of the price increases, company officials said.

"If we didn't have that, we probably wouldn't be running today," said Scott Conant, the company's regional controller.

Diesel and power prices also have hurt forest-products manufacturers.

Portland-based Louisiana-Pacific warned investors Feb. 28 that first-quarter profits would suffer because the company was paying more than expected for deliveries of wood fiber, energy for its manufacturing mills and petroleum-based raw materials, an official said.

Food processors rely most heavily on natural gas during summer harvests. Still, Norpac Foods recently switched from natural gas to heating oil to run boilers at its Stayton plant. The farmer cooperative expects to pay more than twice as much for natural gas this summer than it did last year, lowering profits for its members, said Mark Steele, Norpac's corporate engineer.

Truckers might be screaming loudest. Early last week, average West Coast diesel prices hit $1.80 a gallon, a 30-cent rise since Christmas week, the U.S. Energy Department reported. In response, trucking companies began passing the higher fuel costs on to customers by raising fuel surcharges.

Last month, fuel surpassed maintenance as Titan Freight Systems' second-highest cost behind labor. The Milwaukie trucking company, which hauls freight for such customers as Intel and Fred Meyer, raised its fuel surcharge from 3 percent to 4 percent. Larger companies are imposing higher surcharge rates.

Even as costs rise, Titan for the first time in five years is seeing no growth in monthly revenues, compared with the previous year, because of slow shipping demand, company vice president Keith Wilson said.

"The depressed business levels are hurting us, compounding this fuel run-up," Wilson said. "It's really a dangerous mix for some trucking companies."

Smaller truckers are most at risk because they have less leverage to impose surcharges, industry experts said. Over the past two years, thousands of trucking companies have gone out of business as shipping demand has slowed and diesel prices have risen.

Hutchison, an independent truck driver from Molalla, sought bankruptcy protection last month after demand sank for his services hauling sawdust and wood chips. Hutchison borrowed from family and retooled his operation. He now hauls Tillamook cheese and butter in a refrigerated trailer.

But the recent spike in diesel prices has prompted the 47-year-old father of two to hold off on a $1,500 repair to his truck's suspension system. He's considering running with a leaky radiator unless he and friends can find a way to fix it for cheap.

"It cuts into your preventative maintenance," Hutchison said of the fuel costs. "When you start doing that, you're going to pay in the long run."

Oil industry experts said diesel prices should fall once temperatures warm.

But natural gas and electricity prices are another story, analysts said. The nation's natural gas storage is headed for a record low, they said, fueling predictions that summertime prices will be twice as high as last summer.

And if natural gas costs stay high, electricity rates could hover above normal as well.

"That's not going to be good news anywhere," said Marshall Adkins, managing director of energy research at the Florida-based investment firm Raymond James & Associates. "Our view is this summer is going to be real interesting."

Gail Kinsey Hill contributed to this report. Brent Hunsberger: 503-221-8359; brenthunsberger@news.oregonian.com

money.cnn.com 10, 2003: 10:01 AM EST

Iran's opposition to free pumping also boosts bid for crude as armed conflict in Iraq looms.

LONDON (Reuters) - War jitters boosted oil prices Monday as the United States seemed confident of gaining U.N. support for a resolution allowing it to disarm Iraq by force.

London benchmark Brent for April rose 24 cents to $34.34 a barrel while U.S. light crude rose 26 cents to $38.04, about $3 under highs hit in the buildup to the 1991 Gulf War.

In Vienna, OPEC oil ministers were assembling to discuss output policy ahead of a possible attack on cartel-member Iraq.

Iran said Monday it will oppose any proposal to suspend output limits should war break out in Iraq as this could imply support for a U.S.-led war.

Saudi Arabia and Kuwait have signaled they could allay supply fears by allowing cartel members to pump oil freely. But Saudi Arabia faces stern opposition from Iran for a plan that Tehran says implies support for a U.S. attack by controlling oil prices.

"Iran will not back politically motivated decisions," Iranian Oil Minister Bijan Zanganeh told the official IRNA news agency.

OPEC should refrain from taking decisions which would imply support for a "U.S. military assault against one of OPEC's member states," Zanganeh said.

"It looks like it could be a very strong week for crude and products as war fears mount," said GNI Man Research analyst Lawrence Eagles. Related stories Kuwait to shut oil fields OPEC: speculation driving oil prices Saudi seeks OPEC plan to stop oil shock

"It's difficult to see oil going lower with the potential of conflict so close. There's really nothing to push prices down very quickly, the risks are all skewed to the upside," said David Thurtell, strategist at Commonwealth Bank in Sydney.

Price hurtled higher Friday after a new draft resolution proposed by the United States and Britain set a deadline of March 17 for Iraq to destroy all weapons of mass destruction, or face war. Iraq denies having such weapons.

The showdown vote could come as soon as Tuesday.

The resolution has sparked a wave of intense lobbying in the 15-member U.N. Security Council and U.S. Secretary of State Colin Powell said there was a "strong chance" of getting up to 10 votes in favor of the document.

The issue of Iraq's compliance with U.N. demands has created a bitter divide in the U.N. Security Council.

The United States, Britain, Spain and Bulgaria seek support for military action from Pakistan, Chile, Mexico, Angola, Cameroon and Guinea, while veto powers France, Russia and China say U.N. arms inspections should continue.

But, analysts say war will go ahead even if the resolution is defeated, as Washington intends to lead a "coalition of the willing" against Iraq even without U.N. approval.

"The U.S. position is no longer about avoiding a veto but of demonstrating that if a veto is used, that a majority of the Security Council members support such action," Eagles said. OPEC Quotas

OPEC, which supplies over a third of the world's crude oil, wants to prevent any oil price shocks that could dampen future global economic recovery, but it is expected to stick to its current 24.5 million barrels per day (bpd) output limit for now.

"There may be no formal suspension of quotas but the two or three who can do so will be given freedom to pump at will to cover any losses," predicted one delegate.

Although OPEC has pledged to fill any supply gap should war halt Iraqi exports of two million bpd, many in the group are already pumping close to full capacity.

Only Saudi Arabia has any appreciable room to turn up the taps and analysts estimate OPEC has little over 1.7 million bpd of untapped capacity -- the equivalent of daily Iraqi exports.

But the war threat, hot on the heels of a strike which crippled Venezuela's oil industry, is coming at a time when stocks in the United States, the biggest oil consumer, are at low levels unseen since the Arab oil embargo of the mid-1970s.

Heating oil stocks are especially worrying as cold weather is expected to persist over the U.S. Northeast in coming days.