www.belleville.com Posted on Wed, Mar. 19, 2003
BY DAVID VAN DEN BERG AP

Metro-east drivers have no reason to panic about the impact of war with Iraq on gasoline prices, industry experts say.

"I don't think it's going to be a big deal," said Mike Right, a spokesman for the American Automobile Association in St. Louis. "I think there's other things going on in the oil markets that are going to be as big, if not bigger, a factor in determining what you and I pay at the pump than the Middle East action."

Those other factors, Right said, include the changeover from winter gasoline to summer gasoline -- a change Right said comes with a price penalty that hasn't shown up yet. In addition, Right mentioned low supplies, and an oil industry strike in Venezuela.

Along Illinois 159 between Belleville and Collinsville on Tuesday, prices ranged from $1.54 to $1.64 per gallon.

Muhammad Islam, an economics professor at St. Louis University, said the oil market is betting that the war will be short and that there will not be disruptions in the supply of oil, as evidenced by a drop in the price of crude oil. The price of crude, which reached a 12-year high of $37.83 last Wednesday, has fallen 16 percent over the past four trading sessions.

The price of oil plunged 9 percent Tuesday, falling to its lowest level in more than two months. The April futures contract fell $3.26 to $31.67 a barrel on the New York Mercantile Exchange, the lowest close since Jan. 8.

Jim Forsyth, the CEO of Belleville-based MotoMart, which has 67 gas stations in six states, said once the war starts, the price of oil will likely rise.

"If things look like they're going well, it'll come back down," he said.

Islam said if there is an increase in prices, it will probably be short-lived, because other sources of oil are available.

"The reasonable assumption would be that even if there is a short spike in oil prices, those prices will come down because somebody else will bring more oil to the market," Islam said.

European nations have their own stockpiles that could help make up for any supply shortages resulting from war. In addition, Islam said Saudi Arabia has said they have extra capacity and will pump oil to supply the U.S. market, and there is a possibility the United States could tap into its strategic petroleum reserves.

David Sykuta, the executive director of the Illinois Petroleum Council, said "there's going to be a holding of breath here when things step off." But, Sykuta thinks the United States is in better shape to weather any impact on gas prices than it was during the 1991 Gulf War, in part because the country depends less on oil from the Middle East now.

"We don't depend on them as much as Europe does," he said.

Some information for this story was provided by The Associated Press.

boston.com By H. Josef Hebert, Associated Press, 3/19/2003 11:49

WASHINGTON (AP) As the United States and Iraq move closer to war, oil markets seemed to be taking it all in stride. Global crude oil stocks are growing, prices declining and some analysts are talking cautiously of a possible oil glut on the horizon. Lower energy prices probably would follow.

That is, energy experts warned, if a war in Iraq doesn't drag on and Iraqi leader Saddam Hussein doesn't torch his oil fields or, in the worst case, finds a way to disrupt other Persian Gulf supplies.

For now, the markets are betting those things won't happen and that the war will be a swift one.

Oil prices dropped by more than $3 a barrel, or about 9 percent, on Tuesday, falling to their lowest in more than two months as traders believed there is enough crude in the system to make up for Iraq's lost production if war erupts.

The price of crude oil for April delivery was down another 82 cents to $30.85 a barrel by midday Wednesday on the New York Mercantile Exchange.

Oil traders ''are beginning .. to realize there's a bit of a glut of oil around,'' said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

But that oil has yet to reach the U.S. markets.

The Energy Department said Wednesday U.S. crude oil stocks remained uncomfortably low at 270 million barrels, roughly where inventories have been most of this year and at the minimum industry says is needed for smooth refinery operation. The U.S. stocks increased only slightly over a week ago.

Crude inventories have consistently been 300,000 to 400,000 barrels below a year ago, said Doug MacIntyre, an oil analyst for the Energy Information Administration. Imports also have been down from previous levels, although OPEC producers other than Iraq and strife-torn Venezuela have been pumping more oil for weeks.

The low U.S. inventories reflect transportation delays, but also reluctance by refiners to buy oil when the price has been $35 to $37 a barrel, analysts said.

Much of that oil is now in storage in the Persian Gulf or in tankers on the high seas, say oil analysts. Saudi Arabia is believed to have as much as 50 million barrels in storage in the country and more en route to other storage facilities. That's enough to replace Iraq's 1.5 million to 2 million barrels a day for about a month.

Larry Goldstein, president of the private Petroleum Industry Research Foundation, said the markets also have been calmed because the Bush administration has made clear that it's ready to use some of the 600 million barrels in the Strategic Petroleum Reserve to counter shortages.

Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, said this week he is convinced the reserve is capable of providing oil quickly on orders from President Bush. It has shifted ''from the fill mode to the flow mode,'' Tauzin said.

Still, there remains some trepidation among oil traders and analysts should war in Iraq last a while. Crude oil prices are likely to remain volatile in the months to come, they cautioned.

''This thing could go right back up,'' said Tom Bentz, an analyst at BNP Paribas in New York, suggesting prices could rebound once fighting erupts. ''We're still vulnerable because inventories are tight.''

When prices jumped in the weeks before the Gulf War, oil inventories already were high. That helped cushion the impact on prices, which jumped briefly to more than $40 a barrel and then declined rapidly when it became clear that the war would be settled quickly.

The biggest fear in the market is that oil facilities in other Middle Eastern countries, such as Kuwait or Saudi Arabia, could be attacked a scenario that would cause oil prices to shoot higher very quickly, said Fadel Gheit, senior oil analyst at Fahnestock & Co. in New York.

Short of that happening, there is plenty of oil, Gheit said, and the recent price declines make clear that for the time being the ''war premium'' has disappeared. He said prices could drop an additional $5 a barrel in the coming days.

Energy experts say a glut could result if war in Iraq doesn't drag on and Iraqi leader Saddam Hussein doesn't torch his oil fields or disrupt other Persian Gulf suppliers.

For now, the markets are betting those things won't happen and that the war will be a short one.

www.miami.com Posted on Wed, Mar. 19, 2003
BY CHRISTINA HOAG choag@herald.com

Two months after warning that bankruptcy was imminent, DirecTV Latin America filed Tuesday to reorganize the company's finances and announced a new management team to turn around the troubled satellite TV service.

The Fort Lauderdale-based company, which reported losses last year of $202 million on revenues of $680 million, said it will continue regular operations while under a prepackaged Chapter 11 bankruptcy protection. The filing does not apply to any of its operating companies in Latin America and the Caribbean.

Unable to stanch deepening losses despite extensive cost-streamlining over the previous 18 months, the direct-to-home satellite TV service had warned in January that bankruptcy was on the table if it did not satisfactorily renegotiate contracts with suppliers, programmers and lenders.

''The negotiations didn't give us the contractual modifications we needed for our long-term goals,'' said company spokeswoman Jannice Reyes.

NEW FINANCING

DirecTV's majority stockholder, Hughes Electronics, said it would provide the company with $300 million in debtor-in-possession financing, subject to bankruptcy court approval.

''While we have a formidable challenge ahead, I'm confident that we will emerge as a stronger and more efficient organization,'' said Larry N. Chapman, DirecTV Latin America's new president and chief operating officer.

Hughes named Chapman, formerly Hughes' corporate senior vice president, and Hughes corporate Senior Executive Vice President Eddy W. Hartenstein to lead the turnaround effort.

Hartenstein replaced former Chairman Kevin N. McGrath, who is retiring. The president's post had been vacant.

''I feel it is now time for me to move on,'' McGrath said in a statement. ``Therefore, I have elected to retire and spend more time with my family and pursue other goals.''

DirecTV, which is enjoying robust growth in the United States, is the leading satellite TV provider in Latin America, with 1.6 million subscribers in 28 countries, compared with rival Sky Latin America's 1.4 million.

ECONOMIC SLUMP

Both companies, like other pay TV operators, have been clobbered by Latin America's crashing economies over the past two years. Sky Latin America, owned by Rupert Murdoch's News Corp., reported losses of $152 million in 2002.

Analysts said DirecTV is expected to pull through the restructuring and emerge a competitive player in what should be a profitable market once Latin America's political and economic turmoil subsides.

The region's volatile economic swings have crimped DirecTV's cash flow, and coping with that while servicing debt is the company's challenge, said David Joyce, media analyst at Guzman & Co. in Miami.

TEMPORARY SETBACK

''It's liquidity issues that DirecTV is facing,'' he said. ``They have to take this prepackaged bankruptcy in order not to be swallowed by excessive debt payments. They need to restructure the balance sheets, but will continue to be around and operate, as will other players in the region.''

Hughes, a subsidiary of General Motors, owns 75 percent of DirecTV Latin America. The rest is held by Venezuela's Cisneros Group of Companies and Argentina's Grupo Clarín in a partnership called Darlene Investments.

www.bayarea.com Posted on Wed, Mar. 19, 2003
H. JOSEF HEBERT Associated Press

WASHINGTON - As the United States and Iraq move closer to war, oil markets seemed to be taking it all in stride. Global crude oil stocks are growing, prices declining and some analysts are talking cautiously of a possible oil glut on the horizon. Lower energy prices probably would follow.

That is, energy experts warned, if a war in Iraq doesn't drag on and Iraqi leader Saddam Hussein doesn't torch his oil fields or, in the worst case, finds a way to disrupt other Persian Gulf supplies.

For now, the markets are betting those things won't happen and that the war will be a swift one.

Oil prices dropped by more than $3 a barrel, or about 9 percent, on Tuesday, falling to their lowest in more than two months as traders believed there is enough crude in the system to make up for Iraq's lost production if war erupts.

Oil traders "are beginning .. to realize there's a bit of a glut of oil around," said Leo Drollas, chief economist of the London-based Center for Global Energy Studies.

But that oil has yet to reach the U.S. markets.

The Energy Department said Wednesday U.S. crude oil stocks remained uncomfortably low at 270 million barrels, roughly where inventories have been most of this year and at the minimum industry says is needed for smooth refinery operation. The U.S. stocks increased only slightly over a week ago.

Crude inventories have consistently been 300,000 to 400,000 barrels below a year ago, said Doug MacIntyre, an oil analyst for the Energy Information Administration. Imports also have been down from previous levels, although OPEC producers other than Iraq and strife-torn Venezuela have been pumping more oil for weeks.

The low U.S. inventories reflect transportation delays, but also reluctance by refiners to buy oil when the price has been $35 to $37 a barrel, analysts said.

Much of that oil is now in storage in the Persian Gulf or in tankers on the high seas, say oil analysts. Saudi Arabia is believed to have as much as 50 million barrels in storage in the country and more en route to other storage facilities. That's enough to replace Iraq's 1.5 million to 2 million barrels a day for about a month.

Larry Goldstein, president of the private Petroleum Industry Research Foundation, said the markets also have been calmed because the Bush administration has made clear that it's ready to use some of the 600 million barrels in the Strategic Petroleum Reserve to counter shortages.

Rep. Billy Tauzin, R-La., chairman of the House Energy and Commerce Committee, said this week he is convinced the reserve is capable of providing oil quickly on orders from President Bush. It has shifted "from the fill mode to the flow mode," Tauzin said.

Still, there remains some trepidation among oil traders and analysts should war in Iraq last a while. Crude oil prices are likely to remain volatile in the months to come, they cautioned.

"This thing could go right back up," said Tom Bentz, an analyst at BNP Paribas in New York, suggesting prices could rebound once fighting erupts. "We're still vulnerable because inventories are tight."

When prices jumped in the weeks before the Gulf War, oil inventories already were high. That helped cushion the impact on prices, which jumped briefly to more than $40 a barrel and then declined rapidly when it became clear that the war would be settled quickly.

The biggest fear in the market is that oil facilities in other Middle Eastern countries, such as Kuwait or Saudi Arabia, could be attacked - a scenario that would cause oil prices to shoot higher very quickly, said Fadel Gheit, senior oil analyst at Fahnestock & Co. in New York.

Short of that happening, there is plenty of oil, Gheit said, and the recent price declines make clear that for the time being the "war premium" has disappeared. He said prices could drop an additional $5 a barrel in the coming days.

Energy experts say a glut could result if war in Iraq doesn't drag on and Iraqi leader Saddam Hussein doesn't torch his oil fields or disrupt other Persian Gulf suppliers.

For now, the markets are betting those things won't happen and that the war will be a short one.

Associated Press Writer Brad Foss in New York contributed to this report.

By Allison Linn, Rocky Mountain News March 19, 2003

The biggest, baddest threat on Wall Street this year doesn't sound that scary: uncertainty.

Uncertainty - mainly over whether the country would go to war with Iraq - has been key to dragging the major market indexes down the past couple of months.

That all came to an abrupt halt a few days ago when the Bush administration signaled that war with Iraq was inevitable. The massive market rally that followed finally slowed Tuesday, with major indicators rising just slightly.

Financial advisers said the rally would likely have happened no matter what decision President Bush made - as long as he made a decision.

"I think the market just wanted it one way or the other. I think it would've gone up whether we went to war or not," said Joseph Mossa, managing director of investments with Piper Jaffray in Denver.

Now the big question is: What happens next?

"Right now what we are seeing is what I call a 'sense of relief rally,' " said Sung Won Sohn, chief economist with Wells Fargo in Minneapolis. "(But) once the war actually starts we will get a better fix on how short or messy this war is going to be, and depending on how the war unfolds we could see a significant change in the direction of the market."

In the near term, financial advisers expect investors to react strongly to daily war news, negative or positive.

"So much is going to depend on how things proceed, so for the next several weeks (market fluctuations) are going to be event-driven," said Judi Wagner, of Denver's Wagner Investment Management.

Some said the markets could be affected by the ongoing terrorist threat; others said the markets would only have a major reaction if there were an actual attack on U.S. interests.

No matter what, Sohn doesn't expect as strong a market rally as in the Gulf War in 1991.

For one thing, he said, it will be more difficult to oust Saddam Hussein from Baghdad than it was to liberate Kuwait.

Another factor, Sohn said, is that issues such as a long-term strike of oil workers in Venezuela could keep oil prices high even if a war with Iraq appears headed toward resolution. That would affect any number of industries.

Sohn also is worried about high cost of war and the ultimate effect it could have on the weak U.S. economy.

"I can't imagine it's really a positive," Sohn said.

Still, while war may be at the forefront of many investors' minds, financial experts caution that in the long-term investors will likely become more interested in the fundamental issues that normally drive markets.

The overall economy remains weak, they say, and many will be looking for indicators of a rebound - most notably, an increase in capital spending - before the markets can really improve.

Without improvement in corporate spending, Wagner said, "I see us going sideways for quite a while."