ogj.pennnet.com By OGJ editors

WASHINGTON, DC, Mar. 10 -- US motorists will see higher gasoline prices this spring, averaging about $1.70/gal during the driving season of April through September, with prices peaking at about $1.76 in April, the US Energy Information Administration said.

According to its latest monthly analysis of the energy market, EIA expects pump prices to increase by 28¢/gal on an annual basis to more than $1.60/gal in 2003. But the agency expects prices to fall back toward historically lower levels in 2004. EIA said it expects gasoline to decline by about 13¢/gal over 2004, with a corresponding drop in crude oil prices of as much as $5/bbl. During that time, commercial petroleum inventories should increase to more normal levels.

But in the short term at least, EIA said that in much of 2003 motorists would be seeing much higher prices than they are accustomed to.

At the end of February, gasoline inventories moved toward the lower end of a 5 year range, which helped contribute to pump price increases, EIA said. The price of regular unleaded gasoline averaged about $1.55/gal in the last half of February, or only about 5¢/gal lower than the record nominal price set during the first half of May 2001. Adjusted for inflation, today's prices are still below the all-time record March 1981 price of nearly $2.90/gal, EIA stressed.

Uncertainty continues Even if the situations in Venezuela and Iraq are resolved without further oil disruptions, oil stocks are expected to remain low in the US and other western oil consuming countries through most of 2003. The agency estimates that spare world oil production capacity in March outside of Iraq and Venezuela could be as low as 1.5 million b/d. And that figure could drop further, depending on how much production Kuwait may shut down temporarily if war tensions spread to its borders.

In the months ahead, EIA said there is reason to expect what it calls "substantial price volatility" in oil markets during the coming months.

Despite assurances from the Venezuela government that exports are moving quickly back to historical levels, EIA is less hopeful.

"Although the Venezuelan general strike has ended, the strike against the oil sector continues, and the recovery in production and exports of crude and products has been slow. If the oil strike is prolonged and tensions in the Middle East continue, the chance of a price spike will remain high," EIA said.

Noting that government and opposition sources "continue to cite widely varying figures for the country's current oil production," the agency said it estimates that Venezuela's oil production levels rose from a low of 300,000 b/d at the end of December to an average of 1.4 million b/d in February, and will reach 1.8 million b/d by the end of March.

EIA further assumes in its latest monthly report that the strike will be resolved by the end of April and that enough workers will be rehired to allow Venezuela to reach 2.3 million b/d of production by the end of June.

EIA also is growing increasingly concerned that the strike may have long-term production repercussions.

"It's possible that several hundred thousand barrels per dayd of production capacity will be lost on a long-term basis because of the shutdown and that Venezuela will not be able to attain its pre-strike production level of 2.9 million b/d," EIA said.

Policy implications EIA, as the independent statistical arm of the energy department, does not offer policy recommendations. But other government agencies within the Bush administration, most notably the Department of State, have said that the strike could have lasting trade and economic implications unless Venezuelan President Hugo Chávez seeks a compromise with opposition leaders.

"Until a sincere political compromise is achieved and the level of rhetoric lowered, world energy markets simply cannot view Venezuela with the same certainty that they once did, and, sadly, neither can the US. The damage done cannot be repaired overnight," Under-Secretary of State Alan Larson said Mar. 4 at New York University.

"When the Venezuelan parties show a commitment to seek reconciliation and restore their position as a reliable partner of the US, they will find a willing and ready partner in the US," he said.

www.chron.com March 10, 2003, 8:35AM Associated Press BC-OPEC Meeting,0678 By BRUCE STANLEY AP Business Writer

OPEC unlikely to cover shortfall in crude from Iraq and Kuwait, oil minister says

VIENNA, Austria (AP) -- If war erupts in the Persian Gulf, OPEC will be hard-pressed to boost its oil production further to cover a simultaneous shortfall in crude exports from Iraq and northern Kuwait, an oil minister from one of the group's key members said Monday.

The United Arab Emirates, one of the few OPEC members with spare production capacity, is already approaching its limits, said the country's oil minister, Obaid bin Saif Al-Nasseri.

The Organization of Petroleum Exporting Countries must somehow weigh the impact of a possible U.S.-led war on Iraq when its representatives review their output quotas Tuesday at OPEC's headquarters in Vienna, Austria. Al-Nasseri's comments suggested that the United States and other major oil-importing countries would need to rely on their own strategic petroleum reserves as a cushion against a serious disruption in supply.

OPEC, which pumps about a third of the world's crude, raised its output target by 6.5 percent to 24.5 million barrels in January, in an effort to keep a lid on rising prices. Since then, worsening fears of a conflict have pushed prices to 12-year highs.

A war would almost certainly cut off Iraq's crude exports, currently totaling about 2 million barrels a day. With Venezuela's oil exports still recovering from a strike, OPEC would have to stretch to cover an interruption in Iraqi shipments.

However, Kuwait, which hosts most of the U.S. troops that are poised to attack Iraq, has said that in the event of war it would shut down its northern oil fields as a precaution against a possible Iraqi counterstrike. Such a step would reduce Kuwait's output by around 700,000 barrels a day, or about a third of its current production.

"It (would be) very difficult, I think," for OPEC to make up for lost barrels from both Iraq and Kuwait, Al-Nasseri told reporters as he arrived at a hotel in the Austrian capital. The United Arab Emirates' capacity of about 2.5 million barrels a day is already "about full," he added.

Aside from Saudi Arabia and perhaps Nigeria, most other OPEC members are already believed to be producing at their limits.

OPEC heavyweight Saudi Arabia, which by some estimates is pumping at a rate of 9 million barrels a day, could raise its output to 9.5 million barrels a day within a month and 10.5 million barrels a day within three months.

Importing countries have publicly expressed their desire for OPEC to maximize production if a war threatens supplies and causes prices to spike. U.S. Energy Secretary Spencer Abraham, due this week in Vienna on separate business, said last week that he might meet here with oil ministers from leading OPEC producers.

Some analysts have suggested that large importing countries and OPEC -- two often adversarial camps -- might be aiming to coordinate an increase in OPEC output with a release of crude from importers' strategic reserves in an effort to head off a war-induced disruption.

Iran's oil minister, Bijan Namdar Zangeneh, warned Monday that OPEC shouldn't make any decision that would look appear to support a U.S. invasion of Iraq, Iran's state-run IRNA news agency reported.

"OPEC must refrain from taking political measures," Zangeneh said, adding that "as far as the market fundamentals are concerned, there is no oil shortage in the market currently."

OPEC's biggest fear is that it might gear up to boost production just as seasonal demand starts to decline in the second quarter of the year. It worries that if Iraq were to resume exporting quickly after a war, the combination of surging supply and falling demand could trigger a price collapse.

April contracts of U.S. light, sweet crude were trading Monday at $37.80 a barrel in New York, up 2 cents from Friday's close. Brent crude futures for April delivery were up 6 cents at $34.16 in London.

www.quicken.com Monday, March 10, 2003 05:53 PM ET  Printer-friendly version Dow Jones Newswires

NEW YORK -- U.S. pump prices climbed higher yet again in the week ended Monday, with gasoline just missing an all-time high and diesel setting a new record, according to the Energy Department's Energy Information Administration.

Gasoline prices gained in every region of the country, pushing the U.S. average price of retail gas up 2.6 cents to $1.712 a gallon, 48.9 cents above the year-ago average and just shy of the $1.713 record set in May. California prices led the way, with that state's average up 7.2 cents to $2.084, 63 cents higher than a year earlier.

The U.S. average price of diesel set a record for the fourth-straight week, climbing 1.8 cents to $1.771 a gallon. Diesel prices are now up 55.5 cents from a year ago and have risen 29.3 cents, or 20%, in the past eight weeks.

The EIA has said it expects U.S. retail gasoline prices to set an all-time high in spring and peak in April at $1.76 a gallon. Soaring prices have already prompted several politicians to ask questions about market manipulation, as well as raising concerns additional pressure is being put on U.S. consumers as the economy struggles to mount a sustained recovery.

Industry analysts say pump prices have been pushed up by costly crude oil, which has risen 56% in the past year to near 12-year highs on concerns about supply disruptions in the event of war with Iraq, reduced output from Venezuela due to a strike and inventories that are running near the bottom of what are considered sustainable levels.

Crude-oil costs account for about half of the pump price of a gallon of gasoline or diesel, the EIA noted.

The agency has also said high prices are likely to persist, as there isn't enough crude flowing through the system to enable inventories of petroleum products and the crude from which they are produced to recover simultaneously.

While gasoline prices are up throughout the country, California's consumers have seen the sharpest spikes, a result of hiccups in the state's transition to gas blended with ethanol. The low-evaporation blend required for summer use is particularly difficult to get right, as the higher volatility of ethanol has to be counteracted, analysts have said.

California's pump prices are easily the highest in the country, running at least 40 cents a gallon over other regions. Prices on the West Coast as a whole increased 6.1 cents on the week at $1.993 a gallon.

Prices in the politically sensitive Midwest region rose 2.6 cents to $1.690 a gallon. Attorneys general in Wisconsin, Illinois and Iowa asked the Federal Trade Commission Friday to look into whether market manipulation has played a role in the rising prices.

Gasoline was cheapest on the Gulf Coast, the heart of the country's refining industry, where the average gained 1.3 cents to $1.592 a gallon.

Diesel prices climbed in every region but the Gulf Coast, where they fell 0.3 cent to $1.697 a gallon. Prices were highest on the West Coast, where they shot up 8.1 cents to $1.886 a gallon.

-By Andrew Dowell, Dow Jones Newswires; 201-938-4430; andrew.dowell@ dowjones.com

www.islandpacket.com By BRUCE STANLEY, AP Business Writer Published Monday, March 10th, 2003

VIENNA, Austria (AP) - OPEC will increase its oil production and possibly even suspend its current output quotas to keep the world supplied with ample supplies of crude in the event of a war with Iraq, the group's president said Monday.

Members of the Organization of Petroleum Exporting Countries can pump an additional 3-4 million barrels of fresh oil a day, and they are prepared to exhaust this spare production capacity if a war seriously disrupts exports from the Persian Gulf, said OPEC President Abdullah bin Hamad Al-Attiyah.

OPEC's secretary general and oil ministers from Iran, Algeria and Venezuela played down the possibility that the group might suspend its output ceiling, currently set at 24.5 million barrels a day. Al-Attiyah indicated he favors a greater degree of flexibility, without actually endorsing a temporary suspension.

"OPEC will do the most it can to avoid any shock in the market," he told reporters ahead of a policy meeting Tuesday at OPEC headquarters in Vienna, Austria.

OPEC, which pumps about a third of the world's crude, is already exceeding its target as members cash in on prices that have soared to 12-year highs amid fears of a war-induced supply shortage from Iraq.

A conflict would almost certainly disrupt Iraq's daily shipments of 2 million barrels, but at least one OPEC member - the United Arab Emirates - expressed doubts about the group's ability to cover a larger shortfall if fighting spreads beyond Iraq's borders.

"OPEC should not be blamed," Al-Attiyah said as he arrived at a Vienna hotel. "We will do whatever we can, but this is in accordance to our capacity. When we reach a level that we cannot exceed, then we cannot do anything."

Al-Attiyah said the market was already well supplied with crude. Saudi Arabia's oil minister Ali Naimi, speaking to reporters upon his arrival at a different hotel, agreed but gave no further details.

However, the United Arab Emirates' oil minister, Obaid bin Saif Al-Nasseri, warned it would be "very difficult" for OPEC to pump enough oil to cover a simultaneous shortfall in crude exports from Iraq and northern Kuwait.

Kuwait, which hosts most of the U.S. troops that are poised to attack Iraq, has said that in the event of war it would shut down its northern oil fields as a precaution against a possible Iraqi counterstrike. Such a step would reduce Kuwait's output by around 700,000 barrels a day, or about a third of its current production.

Al-Nasseri's comments suggested that the United States and other major oil-importing countries would need to rely on their own strategic petroleum reserves as a cushion against a serious disruption in supply.

The United States and other major importing countries want OPEC to maximize production if a war threatens supplies and causes prices to spike. U.S. Energy Secretary Spencer Abraham, due in Vienna Tuesday on separate business, said in London that he might meet here with oil ministers from leading OPEC producers. Al-Attiyah said Abraham had so far not requested to meet with him.

Some analysts have suggested that large importing countries and OPEC - two often opposing camps - might be trying to coordinate an increase in OPEC output with a release of crude from importers' strategic reserves in an effort to head off a war-induced disruption.

Despite Al-Attiyah's claim that OPEC has "3-4 million barrels" in daily spare capacity, it was not clear how much higher the cartel could go in satisfying U.S. demands. Al-Nasseri said the United Arab Emirates' capacity of about 2.5 million barrels a day was already "about full." Aside from Saudi Arabia and perhaps Nigeria, most other OPEC members are already believed to be producing at their limits.

OPEC heavyweight Saudi Arabia, which by some estimates is pumping at a rate of 9 million barrels a day, could raise its output to 9.5 million barrels a day within a month and 10.5 million barrels a day within three months.

Yet, not all of OPEC's extra capacity is likely to be available right away. Al-Attiyah's figure for OPEC's production potential appeared to include Venezuela's nominal capacity of 2.35 million barrels a day, yet Venezuelan exports are still recovering from a crippling strike and analysts have suggested it could be months before that country resumed pumping at its earlier levels.

OPEC raised its output target by 6.5 percent in January, in an unsuccessful effort to keep a lid on rising prices. Prices for U.S. light, sweet crude have since reached a post-1991 peak of $39.99.

April contracts of U.S. crude were trading Monday at $37.25 a barrel in New York, down 2 cents from Friday's close. Brent crude futures for April delivery closed 35 cents lower at $33.75 in London.

Several OPEC oil ministers attributed high prices to war hysteria and argued that there is plenty of oil to meet demand. Iran's Oil Minister Bijan Namdar Zangeneh warned Monday that OPEC shouldn't take any decision that would look appear to support a U.S. invasion of Iraq, Iran's state-run IRNA news agency reported.

sg.biz.yahoo.com Tuesday March 11, 6:01 AM (MORE) Dow Jones Newswires 03-10-03 1634ET

MEXICO CITY -(Dow Jones)- Mexican state oil monopoly Petroleos Mexicanos (E.PEM), or Pemex, said it produced a record 3.42 million barrels of crude oil Sunday.

In a press release Monday, Pemex said new production wells at its heavy crude offshore Cantarell oil field contributed to the new production level.

The Northeast Marine Region, which includes Cantarell, produced 2.45 million barrels of crude Sunday, almost all heavy crude. Cantarell contributed 2.12 million barrels.

Pemex is aiming to produce an average of 3.4 million b/d of crude oil this year, up from 3.2 million b/d in 2002. By 2006, Pemex expects to be producing 4 million b/d of crude.

The new record output comes as Mexico ramps up its crude exports in response to rising prices and supply concerns generated by the threat of war in Iraq and Venezuela's general strike in December and January.

Pemex exported 1.79 million b/d of crude oil in January - out of total production of 3.3 million b/d - and planned to increase exports to 1.88 million b/d in February.

Energy officials have said Mexico could add an additional 100,000 b/d to the market if needed, although Deputy Energy Minister Juan Antonio Barges said last week that he considered the market to be saturated at present.

-By Anthony Harrup, Dow Jones Newswires; (5255) 5080-3450, anthony.harrup@dowjones.com