Sunday, March 23, 2003
Posted by click at 10:49 PM
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oil
Reuters, 03.21.03, 4:46 PM ET
By Richard Valdmanis
NEW YORK (Reuters) - A wild ride for oil prices leading into the U.S. war on Iraq may have looked mad to people on the sidelines, but experts say the dramatic price moves reflect a market doing its job to ensure stable supplies.
Oil prices have dropped 30 percent in the past week to below $27 a barrel on expectations of a swift victory for U.S. forces in Iraq. Just three weeks ago, prices were near $40 after a dizzying 60 percent rise in three months on fears that the coming war would cut Middle East supplies.
"The oil market has done a good job," said Jim Ritterbusch, an analyst with Ritterbusch and Associates. "Prices shot up to $40 because of a very uncertain outlook for the war amidst low stock cover here at home, and signaled the need for higher imports. And the price plunge was a market mechanism simply discounting for a fast, clean war."
Oil's dramatic prewar gyrations were mirrored in other financial markets including gold, stocks and the U.S. dollar. But oil's dependence on the Middle East, which supplies 40 percent of world crude exports, made it swing even more dramatically.
The petroleum price meltdown was similar to the situation of more than a decade ago when the United States launched its offensive in the first Gulf War. The difference was that the selloff this time started even before the opening missile salvos, as dealers scrambled to stay ahead of the price curve.
"The reversal has gone from 'Oh God, this is going to be awful' to 'We're just going to walk right into Baghdad with flowers in our gun barrels,"' said Bill O'Grady, analyst at A.G. Edwards.
A lack of spare supply has made oil markets more vulnerable than usual to sudden moves, driven by investment fund speculators taking big bets on the direction of prices.
U.S. crude oil supplies are near the lowest levels since 1975 after an oil workers' strike in key regional oil exporter Venezuela ran down supplies during a severe northern winter.
RED FLAG TO SUPPLIERS
The red flag of $40 oil, raised because of further worries that conflict could mean shipping disruptions or widespread damage to oil fields, was clearly seen by the world's major exporters, including OPEC kingpin Saudi Arabia, which has ramped up its production levels.
"Now there are fears of a wall of oil coming from the Middle East," O'Grady said. "The market is expecting some 39 million barrels in crude oil imports over the next six weeks."
Expectations that higher Saudi supplies will soon reach U.S. shores have enabled the Bush administration to avoid tapping emergency oil reserves.
"OPEC quickly jumped into the fray and said we're going to meet market requirements when we get into a war situation," added Ritterbusch. "Now the market has seen OPEC easily compensate for lost Iraqi oil flows at a time of the year when global oil demand tends to slip."
The early indications in the U.S. attack on Iraq are also cultivating optimism among oil dealers of a swift war without major disruptions to oil flows -- helping push prices back below $30 a barrel, analysts said.
While there are reports of some burning oil fields in southern Iraq, the Pentagon forecast the U.S. military would take control of those fields and secure them later Friday. There are also few indications of any impact on oil operations in neighboring countries.
"It became more clear that prices did not reflect the real market fundamentals," said Sarah Emerson, an analyst for Energy Security Analysis Inc. "Uncertainty was replaced by certainty. How far down does it go? Well, the war is going well, but I think we're close to the floor."
Posted by click at 10:47 PM
in
oil
Reuters, 03.21.03, 4:10 PM ET
NEW YORK, March 21 (Reuters) - NYMEX crude oil futures fell to their lowest level in four months on Friday after U.S. and British forces seized control of key oil-producing areas in southern Iraq, signaling that the interruption in Iraq oil exports could be short.
Perceptions that the U.S.-led war would end quickly grew as the United States blasted Baghdad with massive air strikes and U.S. and British ground forces penetrated deep into Iraqi territory.
NYMEX May crude, the new front month, slumped to an intraday low of $26.30 a barrel, the lowest level for prompt crude since Nov. 26, before settling at $26.91, down $1.21, or 4.3 percent, on the day. It peaked at $27.70.
NYMEX prompt crude futures have now given up more than $13, or 33 percent, from the 12-year high of $39.99 reached on Feb. 27.
With the important oil fields near Basra and a strategic oil port in southern Iraq now in the hands of U.S.-led forces, analysts see a relatively rapid return of some of Iraqi oil exports.
"This suggests that Iraq may be able to resume some level of crude oil exports relatively quickly once the military invasion phase of this project is wrapped up and the military occupation phase begins," said Tim Evans, senior energy market analyst at IFR-Pegasus in an afternoon commentary.
In London, May crude settled down $1.15, or 4.7 percent, at $24.35 a barrel.
British Defense Chief Sir Michael Boyce said all key components of the southern Iraqi oil fields, which pump half the country's output, had been safely secured.
Only seven oil wellheads had been torched in the south, less than the 30 previously reported, although oil-filled trenches were also ablaze, he said.
British Defense Minister Geoff Hoon said the U.S. and British forces also secured Faw, a strategic port linking pipelines to Iraq's main Gulf export terminal Mina al-Bakr.
Bombs and missiles rained on Baghdad on a massive scale as the United States unleased its "shock and awe" campaign aimed at removing President Saddam Hussein from power.
Briefing U.S. congressional leaders, U.S. President George W. Bush said on Friday that "we're making progress" in the war on Iraq, though White House officials cautioned that U.S.-led forces still faced many risks.
As armored columns raced toward Baghdad, U.S. forces ran into resistance from Iraqi troops near Nassiriya on the Euphrates river, about 235 miles (375 kms) southeast of Baghdad, which halted their advance on Friday.
One murky issue, oil traders said, was whether Saddam survived a missile attack Wednesday night that targeted him and other Iraqi leaders in a compound at the heart of Baghdad.
Iraq said he did survive but there were reports that he might at least have been injured. ABC News said Saddam was seen being carried out of the rubble on a hospital stretcher wearing an oxygen mask.
Traders said a quick end to the conflict would hasten the return of Iraq's U.N.-supervised oil exports, which averaged 1.7 million barrels per day as of the week to March 14.
With Iraq's return to the market, however, the markets could be awash in oil as OPEC, led by powerhouse Saudi Arabia, has been ratcheting production up in the past months to cover any interruption of Iraqi exports.
The cartel members also raised oil flow to plug shortfalls caused by a long strike in major producer Venezuela, also an OPEC member.
Falling with NYMEX crude, NYMEX April heating oil futures settled down 6.88 cents, or 8.3 percent, at 75.56 cents a gallon, its lowest settlement since Dec. 9.
NYMEX April gasoline futures settled down 5.74 cents, or 6.3 percent, at 85.25 cents a gallon, the lowest settlement since Jan. 8.
In other news, Royal Dutch/Shell <RD.AS> <SHEL.L> declared force majeure for up to 14 days on up to 1 million barrels per day (bpd) of Nigerian crude oil exports because of ethnic violence briefly limiting crude's slippage midday.
canada.com
Friday, March 21, 2003
VANCOUVER (CP) -- The B.C. Utilities Commission said Friday it has approved a B.C. Gas application for an increase in the rates it charges for natural gas.
The increase will add approximately 16 per cent to the typical residential customer's total gas bill, the commission said in a news release.
It estimated the rate hike will add $184 a year for a typical Vancouver-area home, $167 a year for a home in the B.C. Interior and $183 a year for a home in the Kootenay region of southeastern British Columbia.
The increase will take effect April 1.
Natural gas prices have risen substantially on the open market in the last six months because of heavy demand due to cold-weather heating requirements, the commission said.
Rising crude oil prices, spurred by civil disruption in Venezuela and uncertainty around the Middle East situation have also pushed up natural gas prices.
The B.C. Gas rate increase allows the utility to pass on its increased cost to consumers. The commodity price of gas makes up about two thirds of the typical residential gas bill.
Friday, March 21, 2003
(03-21) 14:57 PST CHICAGO (AP) --
Japan's soccer team canceled its two-game U.S. tour because of the war in Iraq, and the Americans instead will play Venezuela on March 29 at Seattle.
Japan was scheduled to play Uruguay on March 26, and the United States three days later.
After the Japanese Football Association decided Friday to cancel the trip, the U.S. Soccer Federation quickly signed a deal to play Venezuela.
"We are certainly disappointed by the decision of the Japanese Football Association," USSF president Bob Contiguglia said. "We provided their federation with ample evidence of the extensive security measures in place."
In their only meeting, the United States and Venezuela tied 3-3 in the 1993 Copa America, the championship of South America.
Tickets sold for the Japan-U.S. game remain valid, but refunds will be given through March 28.
ChevronTexaco Corp. (NYSE: CVX) is closing its 340,000 barrel-per-day Escravos terminal in Nigeria near the oil city of Warri after the country's military ordered the area evacuated in the wake of escalating violence that reportedly left at least 10 soldiers and scores of civilians dead.
A ChevronTexaco contract worker was killed earlier in the week.
Impending shutdown of the Escravos terminal raised growing fears of world oil shortages even as some 1.8 million barrels-per-day of Middle Eastern production was scuttled because of the U.S.-led war on Iraq. Venezuela, the U.S.'s fourth-largest supplier and the world's fifth-largest exporter, has yet to return to full production after an oilworkers' strike earlier this year.
Saudi Arabia is the U.S.'s largest source of foreign crude, followed by Canada, Mexico, Venezuela and Nigeria. Venezuela and Nigeria are members of OPEC, whose other members are said by industry analysts to lack sufficient surplus capacity to offset production losses from those nations and the Middle East.
San Ramon-based ChevronTexaco, Nigeria's third-largest foreign-equity producer, also declared force majeure on exports from Escravos, notifying purchasers that it may not be able to deliver March and April shipments. Oil traders said as many as 14 shipments scheduled for March and April could be affected.
Royal Dutch/Shell Group, which accounts for more than half of Nigeria's 2-million-bpd production, also was likely to declare force majeure, according to international media reports and the state-owned Nigerian National Petroleum Corp.
The Escravos terminal, which serves the oil-rich Niger delta fields in southern Nigeria, ships more than 13 percent of the oil that accounts for 95 percent of export income in Africa's most populous nation. Oil exports are the foundation of Nigeria's economy. ChevronTexaco and Shell have reported losses of 266,000 bpd since escalating violence between Ijaw and Itsekiri tribal fighters resulted in the Nigerian army ordering the area evacuated. In addition to tribal animosities, both groups are seeking greater concessions from foreign oil companies against the backdrop of national elections next month in which President Olusegun Obasanjo is seeking a second term. Some observers have described the violence nationwide as the worst since the Biafran civil war of the 1960s.
The Nigerian and Venezuelan cutbacks haven't had a direct effect on the East Bay's five refineries, whose major crude sources are Alaska and California's Central Valley fields. But they have helped drive up worldwide crude prices, which have led to soaring retail prices in the United States and the Bay Area, which now has the nation's highest pump rates for gasoline and diesel.