www.vheadline.com Posted: Wednesday, March 12, 2003 By: Patrick J. O'Donoghue

The Tampa Bay Rays have sent top Venezuelan baseball player, Geremi Gonzalez to the minor leagues claiming that he is far from top form.

Geremi isn’t the only casualty … 8 other countrymen have had similar sentences passed against them.

The Cincinnati Reds have sent Rainer Olmeda to the minors, the Royals Alejandro Machado, the Twins Gabriel Torres and Luis Antonio Rodriguez, Yankees Omar Fuentes, Padres Humberto Quintero, Rangers Fernando Lunar and Cubs Eliezer Alfonzo.

All in all, sports commentators confirm that 16 Venezuelan have been sent down during spring training ... with 72 still eligible for major leagues.

www.theledger.com Published Wednesday, March 12, 2003 By BRUCE STANLEY AP Business Writer VIENNA, Austria A surge in world oil output last month has left producer countries with too little spare capacity to fully offset a wartime halt in supplies from Iraq, the International Energy Agency warned Wednesday. Output increased 2.5 percent worldwide in February and oil inventories tightened in major importing nations, the agency said. Fears of a U.S.-led attack on Iraq propelled prices to their highest levels since the 1991 Persian Gulf War. International oil markets are "running on empty" as war clouds gather again in the Gulf, the agency said in its monthly oil market report. "A further supply disruption would tax a system operating at close to capacity," the report said. The only reliable cushion for consumers may be the 4 billion barrels in strategic stocks of crude that IEA members have amassed for use in an emergency, it added. The agency issued its grim assessment a day after the Organization of Petroleum Exporting Countries decided to leave its oil production quotas unchanged at 24.5 million barrels a day. OPEC, which pumps about a third of the world's crude, made clear that it would boost its output to try to cover any shortfall arising from a war. The IEA is the energy watchdog of the Organization for Economic Cooperation and Development, a group of the world's wealthiest oil-importing countries. While highlighting many causes for concern in oil markets, the IEA expects that the end of winter - the peak season for heating oil sales - will reduce demand for crude by about 1.6 million barrels a day. Such a decrease would in itself offset a loss of Iraq's current exports under the U.N. oil-for-food program, the report said. The IEA acknowledged efforts by OPEC and independent producers to put additional crude on the market. World production rose in February by 1.96 million barrels a day to 79.41 million barrels, and OPEC contributed more than three-fourths of the increase, the agency said. OPEC member Venezuela boosted its daily production by 850,000 barrels as its oil industry continued to recover from a crippling strike. Saudi Arabia's output grew by 330,000 barrels a day, and of OPEC's 11 members, only Iraq and Indonesia failed to pump at higher levels last month, the report said. "If the IEA's numbers for OPEC production in February are correct, there's a lot of oil on the water that should be hitting inventories in a few weeks. That's the good news for consumers," said Adam Sieminski, an oil price strategist at Deutsche Bank in London. Sieminski agreed that OPEC's limited amount of spare capacity could be a problem if markets suffer a serious supply disruption. Most producers are pumping all they can, and only Saudi Arabia - with the world's biggest oil reserves - has significant room to pump more. OPEC claims to have 2 million to 4 million barrels in additional production capacity. The IEA argued that OPEC's "effective spare capacity" - the additional crude it could produce on short notice - was much smaller. The agency said OPEC's effective spare capacity fell last month to 1.72 million barrels a day from 2.37 million barrels in January, as the cartel produced more oil to make up for the outage from Venezuela. With OPEC increasing production to cash in on current high prices, this extra capacity has probably diminished in March to fewer than 1 million barrels a day, the report said. It warned that OPEC would therefore be unable to quickly cover a war-induced shortfall from Iraq, which produced 2.49 million barrels a day in February. If U.S.-led forces attacked Iraq during the second half of March, the IEA suggested that it would be May before OPEC could offset the shortfall. U.S. spot prices for light, sweet crude climbed by an average of 8.4 percent in February to $35.75 a barrel, while futures prices peaked at $39.99 on Feb. 27. The average spot price of North Sea Brent, the European benchmark crude, rose by 4.3 percent to $32.67, the report said. Projected oil demand for 2003 is 78.01 million barrels a day. A cold winter and greater industrial use of crude in Asia and North America kept demand strong in January, and seasonal demand should fall by 1.6 million barrels a day in the spring, the IEA said. "I think that's a vast underestimate," said Kevin Norrish, head of commodities research at Barclays Capital. He argued that high crude prices are discouraging consumption and slowing economic growth. "The risk has got to be that we'll see a very, very steep fall in demand in the second quarter," Norrish said, echoing OPEC's fears of a possible drop in prices if Iraqi exports resume quickly after a war. On Wednesday, April contracts of U.S. light, sweet crude rose $1.11 to $37.83 a barrel on the New York Mercantile Exchange. On the International Petroleum Exchange in London, April Brent rose 62 cents to $33.91 a barrel. Last modified: March 12. 2003 5:21PM

www.vheadline.com Posted: Wednesday, March 12, 2003 By: Patrick J. O'Donoghue

Snubbing Florida Republican congressmen calling for the application of Organization of American States (OAS) Democratic Charter against his administration, President Hugo Chavez Frias has invited a group of US Democrat congressmen to visit Venezuela to see democratic advances in Venezuela for themselves.

Venezuelan Ambassador to Washington, Bernardo Alvarez has passed a letter from President Chavez Frias to the congressmen, answering accusations that the government is hell-bent on persecuting political opponents.

The letter includes details of charges against the leaders of the failed national stoppage and a copy of the Attorney General’s Office about the arrest of Federation of Chambers of Industry & Commerce (Fedecamaras) president Carlos Fernandez.

Ambassador Alvarez admits that President Hugo Chavez Frias has asked the visitors to refrain from commenting on Venezuela’s domestic political affairs, but insists that they can talk to whomsoever they please.

www.vheadline.com Posted: Wednesday, March 12, 2003 By: PETROLEUMWORLD

OPEC President Abdullah bin Hamad Al Attiyah said Wednesday the group's focus is now on a cut in crude oil output because he is afraid of a collapse in prices.

"What I'm afraid of in coming months with more oil in the market...is how will OPEC manage to avoid a (price) shock," he told Dow Jones Newswires.

At their output policy meeting Tuesday, oil ministers reassured markets they will pump more oil if there's demand. But many are skeptical about how much crude the Organization of Petroleum Exporting Countries and its de-facto leader Saudi Arabia can or want to pump.

OPEC, excluding Iraq, kept their current production ceiling of 24.5 million barrels a day intact.

Looming large are a US-led war against Iraq and a seasonal, second-quarter downturn in crude consumption in the Northern Hemisphere. Oil ministers will be tested BY trying to balance the two over the coming weeks.

"Now the concern is on what we'll do to cut production," Al Attiyah said.

This question was "more realistic and pragmatic" to answer than the issue of spare capacity, Al Attiyah said.

Saudi Arabia's Oil Minister Ali Naimi said Tuesday that the size of a fall in demand may not be as much as expected: "Demand may be the same. Maybe people will be building inventories. We don't know."

The International Energy Agency monthly report Wednesday stick to its second-quarter demand forecasts. It also said high oil prices, tight stock and reduced spare capacity in OPEC has left the global oil market on a knife edge, with very little flexibility to respond to further supply disruptions.

The general strike in Venezuela and fears of war in Iraq have pushed up prices and combined to reduce Organization for Economic Cooperation and Development oil stocks in January to 50 days of forward cover from 55.5 days a year ago, the Paris-based IEA said.

"A further supply disruption would tax a system operating at close to capacity," the IEA report said.

February output from all 11 OPEC members increased by 1.5 million bpd from January to 27.16 million bpd.

OPEC-10 output, excluding Iraq, was also up 1.5 million bpd on the month at 24.67 million bpd.

Output from Saudi Arabia increased 330,000 bpd to an average of 8.85 million bpd in February as the OPEC kingpin boosted supplies to cover for a shortfall in Venezuelan crude.

The IEA estimated Saudi oil output was more than 9 million bpd in the past two weeks.

Wednesday, the Kuwait News Agency reported Kuwait had begun pumping crude at full capacity of 2.4 million bpd. Kuwait's OPEC quota is 1.965 million bpd.

KUNA quoted a Kuwaiti oil official as saying the country won't close any oilfields if there's a war in Iraq.

At Tuesday's meeting, OPEC was anxious not to assume a war against one of its members is inevitable. It scheduled its next meeting three months on June 11 in Qatar, but many OPEC sources say they think they'll meet sooner.

Saudi's Naimi said OPEC must hold an emergency meeting in the event a US-led war breaks out in Iraq, Arabic al-Hayat newspaper reported Wednesday. "If the war occurs, God forbid, then OPEC as a responsible organization must convene and look into the market situation," Naimi said.

The oil markets are unconvinced OPEC can or will pump significant volumes of extra oil into the market to calm prices. For that reason, markets are focused on international events and whether the US and the West's energy watchdog, the IEA, will release their massive reserves.

OPEC's basket of seven crude oils averaged $32.54 a barrel Tuesday, compared with $33.11/bbl Monday.

At 1411 GMT, European benchmark April Brent crude futures on London's International Petroleum Exchange were trading down 23 cents at $33.06/bbl, while April US light sweet crude trading on New York's Mercantile Exchange was down 39 cents at $36.33/bbl.

By Adam Smallman, Dow Jones Newswires; 44-20 7842-9262; adam.smallman@dowjones.com

(Selina Williams in London and Sally Jones in Vienna contributed to this article)

www.bayarea.com Posted on Thu, Feb. 27, 2003 By David A. Sylvester Mercury News

Soaring gas prices in the Bay Area -- averaging $2 a gallon in San Jose -- could go even higher after crude oil hit its highest price in 12 years Wednesday amid tightening supply and fears of war.

Crude oil surged to $37.70 a barrel in the New York markets, a price not seen since October 1990, when Iraq occupied Kuwait at the start of the Persian Gulf War. At the same time, the federal Energy Department reported oil inventories fell last week to the third-lowest level in at least 19 years.

That's pushing gas prices higher and, unfortunately, relief is not in sight.

Among the reasons prices are rising: fears of the loss of Iraq's oil during a U.S.-led attack; the unusually low inventories and tight supplies after a strike blocked oil from Venezuela; and higher profit margins among refiners and oil dealers.

Bay Area motorists are paying anywhere from an average of $2 for a gallon of regular in San Jose, to $2.12 in San Francisco, only pennies away from the highest prices last year. That's higher than both the state and national averages.

In California, some state refineries have cut production while they change equipment to produce the blend of gasoline used during the hot months of summer. The California Energy Commission reports that this conversion is temporarily tightening supplies in the state, making the cleaner-burning gas used here more expensive than normal.

But the biggest reason for the higher prices remains the threat of a war. Iraq sits atop the world's second-largest oil reserves, and serious damage to its oil fields could destabilize world markets.

``Until something gets resolved about Iraq, we're likely to see prices stay this high,'' said Severin Borenstein, director of the University of California Energy Institute in Berkeley.

So far, the oil markets are following the same pattern they did during the gulf war. After Iraq invaded Kuwait in 1990, prices jumped sharply, to $41.15 a barrel. After U.S.-led forces expelled Iraq from Kuwait, prices fell dramatically.

Whether prices fall again depends on how the war against Iraq proceeds, observers say.

Norman Higby, energy consultant at WMP Forecasts in Menlo Park, predicts prices will drop again after the conflict and stay below their current levels for the foreseeable future.

If so, it would help keep the economy out of a recession.

Keitaro Matsuda, senior economist at the Union Bank of California, said he believes the economy is strong enough to take ``some negative shock'' from the oil price increase.

``The question is how high oil prices might get and how long this will last,'' he said.

In the past two months, dealers and refineries have increased their operating margins -- which include their costs and their profits. Margins for dealers of branded gasoline have doubled, from 9 cents a gallon at the beginning of the year to 18 cents a gallon in late February, according to the California Energy Commission. For brand refineries, the margin rose from 27 cents a gallon at the beginning of the year to 36 cents in late February.

Dennis DeCota, executive director for the California Service Station and Automotive Repair Association, representing brand and independent gas stations, said margins are higher because stations are selling less gasoline.

``As a dealer's volume goes down, he has to increase his margin to stay in business and pay his rent to the oil company,'' DeCota said.

However, UC's Borenstein worries that the state is vulnerable to profiteering during gas shortages.

``The big question is: Is this a tight supply market or is this some sellers driving up prices? I don't know the answer. It's very hard to separate the two.''

Of all the reasons for higher prices, one possible cause has not apparently had much effect. Some oil analysts worried that prices might rise this year as California substitutes ethanol for an additive called MBTE in gasoline to reduce pollution. But so far, the change has not added to the price increases because ethanol is more plentiful than previously expected and cheaper than gas, said Rob Schlichting, energy commission spokesman.

Instead, California's relatively higher gas prices reflect the more refined type of gas used to meet stringent air quality controls.

``California gas tends to be more expensive because it has to go through a more expensive refining process,'' said Chris Kelley, spokesman for the American Petroleum Institute in Washington, D.C.

Contact David A. Sylvester at dsylvester@sjmercury.com or (408) 920-5019.