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VIENNA - Opec heavyweight Saudi Arabia said the organisation would do its best to stabilise oil markets rattled by threats of war in Iraq, as oil ministers prepared to meet in Vienna.

Saudi Oil Minister Ali al-Nuaimi said global oil markets had adequate supplies and pledged the Organisation of Petroleum Exporting Countries would ensure there remained enough to cover demand.

"There is enough oil on the market and we will make sure there is enough," Nuami told reporters ahead of the meeting. OPEC President Abdullah bin Hamad al-Attiyah of Qatar echoed that analysis.

"For the time being we don't feel there is a shortage in the market," he said.

Al-Attiyah explained that after speaking with clients he understood they also felt enough oil was currently available.

Opec ministers are expected to agree Tuesday on maintaining the cartel's overall output ceiling of 24.5 million barrels per day, rolling over a 6.5-percent increase introduced at the start of February to compensate for disruption to supplies from strike-hit Venezuela.

The Qatari minister said OPEC currently had additional capacity of  "about three million" barrels per day.

But since oil markets were adequately supplied, al-Nuaimi said there was no need to change OPEC's production quota system.

"There is no reason to lift the quotas," he said.

Commerzbank analyst Jon Rigby said Monday in London that sticking with the standing arrangement was the most likely outcome because "there isn't a great deal of new capacity to be introduced."

"The second thing is that the market is probably reasonably well supplied at the moment, simply because we are now moving towards the second quarter when demand typically falls for seasonal reasons," he said, referring to spring in the northern hemisphere.

Despite the Opec assurances, oil prices climbed to a new two-and-a-half-year high in London Monday before falling prey to profit-taking.

The price of a barrel of Brent North Sea crude oil for April delivery fell 26 cents to 33.77 dollars a barrel after spiking to a two-and-a-half year high of 34.55 dollars.

New York's benchmark light sweet crude April-dated futures contract dipped 51 cents to 37.27 dollars a barrel.

Bin Hamad al-Attiyah said that the threat of war in Iraq was adding between six to seven dollars per barrel.

Al-Nuaimi said oil prices would stabilise once the threat of war was lifted.

"Eliminate the drummings of war and the price will moderate," he said.

Opec would do its part to stabilise volatile oil markets to underpin global economic growth, he said.

Al-Nuaimi said OPEC's goal was to "make sure we have a fair price for everybody".

"And that fair price should allow reasonable world economic growth so that demand is not killed," he added.

www.twincities.com Posted on Tue, Mar. 11, 2003 BY MARTIN J. MOYLAN Pioneer Press

You may wince as you fill up your car with pricier and pricier gas. But when you're buying more than a billion gallons of fuel a month, as Northwest Airlines and the nation's other carriers do, every penny increase is particularly painful.

Each 1-cent hike in the price of jet fuel costs airlines an average $180 million a year, estimates the Air Transport Association, the industry's leading trade association.

And jet fuel is about twice as expensive as it was a year ago, nudging to $1.30 a gallon this month, the ATA reports.

The industry has not seen such a price increase since the Gulf War buildup in the fall of 1990. But the nation's airlines, which lost more than $10 billion last year, are much weaker than they were then, ATA CEO James May told the Senate Committee on Energy and Natural Resources last month.

"The current fuel price increase is taking place against a backdrop of economic chaos in the airline industry," May said. "There is no cash cushion, no borrowing capacity and no apparent relief in sight."

To reduce the impact of rising fuel costs, airlines use futures contracts and other financial hedges to stabilize their fuel costs. Some airlines, including Southwest and Eagan-based Northwest, are extensively hedged — that is, insured — against fuel price shocks. Others are unprotected.

Northwest has 100 percent of its fuel needs for the current quarter hedged so that it should get jet fuel at 81 to 83 cents a gallon, well below the current spot market price.

For the year, Southwest has 83 percent of its fuel needs hedged, according to a Credit Suisse First Boston report issued last month. Northwest has 70 percent of its fuel needs hedged for all of 2003; Delta, 50 percent; American, 32 percent; Continental, 24 percent; and United and US Airways are not hedged at all, the investment banking firm says.

United's lack of hedges likely will cost the nation's second-largest airline more than $100 million in added fuel costs during the current quarter alone, UBS Warburg analyst Samuel Buttrick told the Wall Street Journal Monday.

Northwest would not discuss its fuel hedging Monday. But in its fourth-quarter earnings call in January, chief financial officer Bernard Han said NWA had a $59 million benefit from its hedges in 2002. During the earnings call, Han also said that NWA's hedges then figured put it about $80 million ahead for 2003.

Fuel is the second-largest expense for airlines after labor. Aviation fuel price increases, largely arising from chaos in Venezuela and worries about a Middle East war, will likely cost airlines several billion dollars this year, said David Swierenga, ATA's chief economist.

Hedging is a tricky and expensive business and can't totally insulate airlines from higher fuel prices, Swierenga said. If an airline guesses wrong about the direction of fuel prices, it can lose a load of money.

Late last month, Northwest, Continental, American and other airlines raised fares $10 in each direction on many routes, citing rising fuel costs.

To reduce the so-called "war premium" currently hanging over oil markets, the ATA is pressing Washington to release at least 1 million barrels per day from the nation's Strategic Petroleum Reserve.

The ATA also supports repeal of a 4.3 cent-per-gallon jet fuel tax adopted in 1993. That would save the airlines about $600 million annually.

Martin J. Moylan covers airlines and can be reached at mmoylan@pioneerpress.com or (651) 228-5479.

www.pantagraph.com Tuesday, March 11, 2003

There should be absolutely no leniency if Central Illinois natural gas or gasoline producers/suppliers/dealers are taking advantage of the threat of a war in Iraq to gouge customers.

And there should be no delay in the Illinois attorney general's office or the Federal Trade Commission to investigate.

Perhaps it is difficult for the public to believe the market is to blame only because that was the ruse used to artificially boost gasoline prices on Sept. 11, 2001. There were 20 companies that wound up making cash settlements in lieu of criminal proceedings by then-Illinois Attorney General Jim Ryan's office over that deal.

Because gasoline price gouging was proven then, it lends credence to beliefs that price gouging may be happening now -- albeit at a much-reduced level than was seen 1 1/2 years ago. The average price of gasoline in the Twin Cities has been hovering at $1.70 per gallon. Back then, gasoline in the Bloomington-Normal area topped $2 per gallon. In the western part of Illinois, gasoline was selling for up to $4 per gallon.

We haven't heard a major roar yet over natural gas bills in Central Illinois, but news releases from the suppliers warning of price hikes usually precede the sticker shock. And the news has gone out in recent days. The companies selling directly to consumers are heavily regulated on what they can charge, but not their producers.

U.S. Rep. Ray LaHood, R-Peoria, has joined a growing number of legislators and attorneys general asking the FTC to investigate. LaHood has been careful not to accuse anyone of taking advantage of war-talk to price gouge. But he is a wily politician who knows that when his constituents begin complaining about the high price of gasoline, he needs to show that he is listening and responding.

Unfortunately, the FTC has done nothing but issue stern warnings when this issue has surfaced in the past, so we don't expect different results this time. Instead of wading into the fray, Illinois Attorney General Lisa Madigan's office is yielding to the FTC. We're not surprised.

We're not sure the public would fully accept the results of an investigation that said the price increases are legitimate because of low crude oil reserves; the problems with the government in Venezuela, which is a major producer of U.S. crude oil; and the threat of war in the Mideast, the major source of crude oil throughout the world.

However, the reasons may be legitimate this time around. The public needs reassurance if that is the case.

Even if Madigan's office and the FTC investigate, the findings will take months. If it goes as usual, prices will have dropped by then and the clamor of the public for some scalps will fade away. The damage to family finances, especially the low income and those on fixed income, will have been done. Politicians will have done their job by asking for help.

We would love to see the FTC and Madigan's office prove us wrong with some quick, thorough investigations.

www.sunspot.net From Wire Services Originally published March 11, 2003

VIENNA, Austria - OPEC, which produces a third of the world's oil, is ready to expand output in a bid to lower prices should a war with Iraq disrupt supplies from the group's third-largest member, ministers said yesterday.

The Saudi oil minister, Ali al-Naimi, said markets have enough oil for now. Officials from three cartel members, Qatar, Algeria, Nigeria and Venezuela, said OPEC can increase output losses to offset any losses from an Iraq war and saw no need for the United States to use its emergency reserves to lower prices.

Oil prices in New York rose as high as $38.20 a barrel yesterday - higher than they were in September 2000, the last time there was a major release from the U.S. Strategic Petroleum Reserve. In London, prices reached a 30-month high of $34.55 a barrel, amid war fears.

"We will do whatever we can to avoid a shortage," OPEC President Abdullah bin Hamad al-Attiyah, who is also Qatar's oil minister, told reporters in Vienna on the eve of the cartel's meeting here today.

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.

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 three-month strike.

That strike has left U.S. inventories at refineries and other businesses close to a 28-year low.

Split over suspension

OPEC is split over whether to adopt a policy to suspend export quotas in the event of war. OPEC Secretary-General Alvaro Silva of Venezuela said such a suspension was "not on the agenda" at today's meeting.

Iran's oil minister, Bijan Namdar Zanganeh, told the nation's state news agency that OPEC "must refrain from taking any politically motivated measures" that would appear to support an invasion of Iraq.

Saudi Arabia, the world's biggest oil exporter, could produce as much as 10.5 million barrels a day within 90 days, Saudi officials say, which is about 1.7 million barrels a day more than it was producing, on average, in February, according to Bloomberg News estimates.

To be sure, not all ministers are optimistic about potential increases.

The Organization of the Petroleum Exporting Countries is operating at "almost full" capacity, United Arab Emirates Oil Minister Obaid Bin Saif al-Nasseri said in Vienna.

"OPEC is a bit split," said Lawrence Eagles, an analyst at GNI-Man Financial in Belfast, Northern Ireland.

Cartel 'is paranoid'

"OPEC is paranoid that raising production is going to result in a second-quarter glut. What matters is what Saudi Arabia says they are prepared to do."

Rilwanu Lukman, Nigeria's senior OPEC delegate, estimated the cartel's spare output capacity at 2 million barrels a day.

The United States and Britain are seeking support this week for a United Nations Security Council resolution that would authorize military action against Iraq if it hasn't rid itself of weapons of mass destruction by March 17.

With war possibly one week away, oil refiners need alternatives for Iraq's legal exports through a United Nations program, which averaged 1.9 million barrels a day in the last week of February.

The possibility that Kuwait's oil exports might be disrupted by a war with Iraq further stretches OPEC's ability to guarantee oil supplies, putting more pressure on consuming nations to release stockpiles to prevent shortages and runaway oil prices.

The reserves aren't to be used just to lower prices, said U.S. Energy Secretary Spencer Abraham. The U.S. holds about 600 million barrels in reserve to ensure supplies during any emergency.

"We are prepared and are very able to act quickly if a decision is made. We have not made that decision at this time," he said at a London news conference.

"We don't think the emergency reserves should be used to manipulate prices. There isn't a price trigger."

Last Friday, the United States and the International Energy Agency, which represents 26 consuming nations, said in a statement that they were prepared to tap emergency supplies in case of a shortage caused by a war with Iraq.

www.interfax.com 11.03.2003 08:07:00 GMT  

Shanghai. (Interfax-China) - With the Chinese government continuing to encourage Chinese oil companies to "go overseas" in search of new reserves, the China National Offshore Oil Corporation (CNOOC) has announced to Interfax that it has acquired a stake in the Kashagan Field in the north Caspian Sea, off the coast of Kazakhstan.

CNOOC has entered into an agreement with BG International Ltd, a wholly-owned subsidiary of the BG Group, to buy a 8.33% stake in the North Caspian Sea Project, covering 5,600 sq km and including the discoveries at Kashagan, Kalamkas, Kairan and Aktote. The company will pay USD 615 mln for the purchase. Kashagan is thought to be the largest find in thirty years, and could contain as much as 13 bln recoverable barrels of oil. The consortium behind the project also includes ENI-Agip, ConocoPhillips, ExxonMobil, INPEX, Shell and TotalFinaElf.

In the attempt to address China's growing energy supply gap, the Chinese government have urged the large state-owned companies such as CNOOC, Sinopec and CNPC to buy stakes in oil and gas fields abroad. CNOOC already has interests in the Tangguh gas field, while CNPC is involved in projects in Venezuela, Sudan, Oman, Azerbaijan and Kazakhstan. Sinopec, meanwhile, has acquired stakes in fields in Nigeria, among others.