URL Reuters, 03.25.03, 7:24 AM ET

LONDON, March 25 (Reuters) - Brent oil futures extended gains on Tuesday as fierce resistance to U.S.-led forces in Iraq provoked fears of a protracted war, and open-ended supply disruptions in Nigeria further stressed the market.

At 1200 GMT, Brent crude for May delivery stood 61 cents higher at $26.70, building on gains of $1.75 on Monday.

U.S. light crude on the New York Mercantile Exchange (NYMEX) was up 81 cents at $29.47 per barrel in ACCESS trade, adding to gains of $1.75 in New York on Monday.

Traders said the twin concerns of Iraq and Nigeria were moving the market with worries that an extended Iraq campaign could disrupt oil supplies from the Middle East.

They also said the loss of sweet Nigerian crude due to ethnic unrest was a bullish factor at this time of the year when refiners are trying to up gasoline production ahead of summer. Nigerian sweet crude has a high gasoline yield.

"Iraq and Nigeria are the two classic symptoms driving the market. The strong performance today is off concerns about production loss in Nigeria and the Iraqis fighting back hard," said one IPE trader.

"Last week some people overdid it on the downside," he added. IPE Brent futures for May delivery fell under $25 a barrel for the first time in over three months on Friday.

U.S. marines fought fierce battles with Iraqi forces on Tuesday in the strategic southern city of Nassiriya and forward units began an assault on troops defending Baghdad. British Prime Minister Tony Blair warned of tough fighting ahead.

Earlier Iraq asked other oil producing states not to hike output to compensate for the loss of Iraqi crude.

Traders said that while world oil markets are generally well supplied, they are still spooked by the shutting of nearly 40 percent of OPEC member Nigeria's over two million barrels per day (bpd) oil output.

As unrest escalates, oil multinationals have closed down practically all their operations in Nigeria's troubled western delta with production of some 817,000 bpd shut in. They could not say when production would resume.

Analysts said the shut-ins once again raised the issue of spare production capacity within the OPEC cartel as another member state Venezuela is only just getting back to normal after a protracted three-month strike.

Weekly U.S. government petroleum data due on Wednesday should show a modest decline in U.S. gasoline stocks, analysts polled by Reuters predicted. April NYMEX unleaded gasoline was up 1.30 cents a gallon to 91.09 cents.

National crude stocks were seen rising by 2.6 million barrels, or about one percent, in the week to last Friday.

April IPE gas oil stood $8.50 higher to $234.75 a tonne.

Universal Resource Locator Posted on Tue, Mar. 25, 2003 By Daniel Altman NEW YORK TIMES

Depending on the outcome of the war in Iraq, its impact on the economy could range anywhere from a recession to a mild stimulant.

The early indications for the economy, as for the war, had been good. On Monday, however, a touch of trepidation dampened the mood.

"On Friday, when everyone went home for the weekend, there was a degree of euphoria," said Henry G. Willmore, chief U.S. economist at Barclays Capital. "There's been a bit of reassessment given the events over the weekend." Still, he added, since a week ago Monday night, when President Bush announced the 48-hour deadline for Saddam Hussein to leave Iraq, "we've still had significant declines in oil prices, and the stock market is up."

For months, expert studies have predicted that a brisk campaign followed by total victory would lead to lower oil prices and increased consumer confidence. In addition, the removal of uncertainty could help some businesses to make investment decisions. Even in the best case, though, some side effects -- from higher mortgage rates to deepening government deficits -- could shave off part of the economy's gains.

"In terms of growth in the first half of the year, we're going to be somewhere in the vicinity of 2 percent" at an annual rate, predicted Peter Hooper, chief U.S. economist at Deutsche Bank Securities. Without the war-related uncertainty, he said, the economy would probably have been able to expand at an annual rate of 3 percent in the first half.

Economists generally agree that the economy needs to grow by at least 3 percent annually in order to improve employment. With growth of just 2 percent, hundreds of thousands of jobs could be lost in a year.

In addition to the stagnating effects of uncertainty, rising oil prices in the months leading up to the war substantially influenced the economy through a "war premium" caused by worries about disrupted oil shipments from the Persian Gulf. The strike in Venezuela's oil industry, which has reduced global supply, and now problems in Nigeria, make isolating the war's effect on prices difficult, though.

Edward F. McKelvey, a senior economist at Goldman Sachs, said he had heard figures of a $7- to $10-a-barrel premium in the first quarter of this year. A premium of $10, he said, would cost consumers about $50 billion a year. Still, he cautioned, "you don't have any really good sense of where the baseline was."

In the first few days of the war, the premium in oil prices had seemed to be vanishing. By Friday, the price of crude oil had fallen to about $27 a barrel from a peak of about $38 on March 7. If that trend held, the war's indirect impact on the economy could be minimal, according to a study by William D. Nordhaus, a professor of economics at Yale University. And yet, as it appeared that Iraqi resistance to the invasion might be stiffening Monday, oil prices edged back up.

In the worst case, a price spike could cost as much as $391 billion over 10 years, Nordhaus wrote. The Center for Strategic and International Studies forecast that a prolonged war accompanied by serious terrorist attacks could drain $472 billion from gross domestic product in this year alone. A loss of that magnitude could qualify as another recession.

Blaming the war for weaker retail sales and a lack of hiring might be a step too far, though, according to McKelvey. "How much of that's war uncertainty, and how much of it's other stuff?" he said. "We would tend to go with other stuff."

On the other hand, a successful conclusion to the U.S.-led invasion could give the economy an immediate shot in the arm for the second half of the year. A report published in November by the Center for Strategic and International Studies suggested that the economy could gain an extra $52 billion in growth in the best case.

"If we get through this without major damage to Iraqi oil facilities, and without any kind of terrorist action, and relatively quickly on the military front, I would think that would be good for the economy," Hooper said. "It would be good for the equity market, and it would be good for consumer confidence."

Read more... Posted on Tue, Mar. 25, 2003 STAFF AND WIRE REPORTS

ChevronTexaco Corp. shut its main oil terminal and offshore oil wells in Nigeria and began evacuating employees and refugees after violent clashes between the Nigerian army and militant members of an ethnic group seeking political reforms.

An employee of a ChevronTexaco contractor was killed by a stray bullet, the company said.

ChevronTexaco said it shut down most of its daily output in Nigeria, including wells that turn out 440,000 barrels a day of crude oil and 285 million cubic feet of natural gas. Loss of its 40 percent stake in that output cut ChevronTexaco's global oil production by about 7 percent, the company said.

Fred Gorell, a spokesman for the San Ramon-based oil giant, declined to speculate on how long the shutdown would last. "We hope it's going to be resolved soon, quickly and peacefully," he said. Other ChevronTexaco affiliates in Nigeria have continued to produce about 40,000 barrels a day, he said.

Gorell, citing uncertainty as to whether next of kin had been notified, declined to identify the employee who was killed. ChevronTexaco said it had airlifted 1,600 non-employees who had sought refuge in its facilities to safety in Nigerian cities.

Shutdowns by ChevronTexaco and other oil companies, including Royal Dutch/Shell Group, owner of a Martinez refinery, reduced by about one-third daily oil production in Nigeria, the United States' fifth-largest source of petroleum imports.

The shutdowns halted the flow of more than 800,000 barrels a day of Nigerian crude into the world market, squeezing oil supplies even as war in Iraq shut off that country's 2.5 million barrels a day and Venezuela struggled to ramp up production after a recent strike. A barrel is 42 gallons.

News of the Nigerian cutoff and uncertainty about the duration of the Iraq war sent wholesale oil prices higher after a week of declines. The benchmark price of a barrel of West Texas Intermediate crude rose 6 percent late Monday, to $29.18 from $24.50, according to Dow Jones Energy Service.

Nigeria is the fourth-largest producer in the Organization of Petroleum Exporting Countries. OPEC President Abdullah bin Hamad al-Attiyah told Cable News Network the disruption is "temporary" and that OPEC members are following developments closely.

Residents of the Niger delta have repeatedly disrupted oil operations in Nigeria, Africa's largest oil producer, to put pressure on the government and demand the producers invest in their communities. Some, with the backing of human rights groups, have sued American oil companies, including Shell and ChevronTexaco, charging them with backing military repression, charges the companies have denied.

On Monday militants of the Ijaw ethnic group threatened to attack oil facilities in the western delta of the Niger River unless President Olusegun Obasanjo's government addresses their demands, Agence France-Presse reported

"We have the tank farms and oil facilities at our disposal, and we will do very funny things with them if the government does not look into the root causes of the matter," AFP quoted Kingsley Otuaro, secretary of the Federation of Niger Delta Ijaw Communities, as saying.

Ijaws want the government to re-draw electoral boundaries near the city of Warri so that members of the ethnic group can control a local government council.

"The Ijaws are sandwiched between local governments controlled by the Itsikerri and Urhobo ethnic groups," said Bobo Brown, a Shell spokesman in Port Harcourt, Nigeria. "Over time, the struggle to get the Ijaws an independent local government has not been very successful."

Obasanjo, who is seeking re-election April 19, has sent troops to the area to quell the unrest. About 10,000 people have died in religious, ethnic and political violence since 1999, when 15 years of military rule ended.

"There has been a running battle between different ethnic groups as the elections approach; they are all caught in this confusion," Brown said. "Years of military rule have left us a culture of crisis and confusion in trying to redress political disputes."

Times staff writer Rick Jurgens and Bloomberg News Service contributed to this story.

Source Tuesday March 25, 7:10 PM

SINGAPORE (Dow Jones)--Oil prices will likely remain higher for longer than is the consensus view, even if the war in Iraq is a "quick and clean" one, Goldman Sachs said in its latest research report.

Goldman said the oil market is experiencing a number of other shocks that are significant to help the prices to stay high.

Oil prices could overcorrect on the downside in the near term. However, after the resolution of the war, oil prices will likely stabilize in the mid-US$20 a barrel range, the report said.

If the war is not quick and clean, there is potential upside to the Brent crude oil forecast of US$26/bbl for 2003, it said.

Goldman said several dislocations other than Iraq are there in the oil market. They include Venezuela's lower production and Japan's closure of nuclear power plants.

Venezuela's production, around 2 million b/d, is 1.4 million b/d less than the pre-strike level, and Japan's closure of most of its nuclear plants has led to a 500,000 b/d increase in oil demand

In the meantime, the natural gas supply crisis in the U.S. has led to users switching from natural gas to oil products, adding 200,000 b/d of demand in 2003. The outbreak of civil unrest in Nigeria over the past week has caused the shut-in of more than 550,000 b/d of production.

The net impact of these shocks is very low inventories, which should support prices for some time, the report said.

-By Xu Yihe, Dow Jones Newswires; 65-6415-4068; yi-he.xu@dowjones.com

-Edited by George Bernard

Source By T. Christian Miller, Los Angeles Times

CARACAS, Venezuela -- Henrique Salas says he is just trying to inject hope into a shattered economy and a divided society.

The second-place finisher in this country's presidential election five years ago, Salas has saturated the television airwaves in recent days with a reminder that he predicted trouble ahead with the victory of current President Hugo Chavez.

"Now it's time to look ahead. Lift your eye up to the skies," Salas says in the 30-second spot, staring into the camera and flashing a toothy grin.

The advertisement -- which Salas insists is not a political ad -- is the latest sign that Venezuela's opposition is crumbling in the wake of a failed two-month national strike to oust Chavez from power.

Salas has become the first major politician to openly distance himself from the Democratic Coordinating Committee, the uneasy coalition that has led the protests against Chavez for the last year.

The possibility of a recall vote and a new presidential election later this year has rent the committee. Labor and business, new and traditional political parties, and the leftists and conservatives who made up the opposition's once-united front are all fighting for power.

The fracture has left the opposition with no clear strategy to confront Chavez, who seems politically stronger than ever after having survived a brief coup last April and then the strike, which cost the country $6 billion.

Formerly massive street demonstrations have declined in both size and frequency. A petition drive to force Chavez out in an even earlier election has gone nowhere. Strike leaders are on the run, seeking political asylum or facing trial on treason charges.

"The opposition is going through a difficult time. They are not going to exercise significant pressure on the government in the next few weeks," said a source close to talks.

"I don't believe the Democratic Coordinating Committee will disintegrate, but yes, they have internal problems."

The failure of the strike and the coalition's problems, in turn, have stalemated the peace talks. Once-daily meetings between the two sides are taking place only occasionally.

The government has little reason to negotiate now that the strike has failed, say those participating in the talks. Cesar Gaviria, the president of the Organization of American States and the talks' mediator, has privately told some diplomats that he thinks there will be no negotiated settlement.

"At the table, nothing is happening. The government has decided to do nothing," the source said. "The most probable thing is there will be no accord but a recall vote by the end of the year."

The president recently implemented currency controls that permit bolivars, the national currency, to be exchanged for dollars only for certain government-approved imports.

Chavez announced that he would not allow coup-plotters access to dollars, which led media owners to fear the measure would be used against them. And in fact, in its first list, released earlier this month, the government did not allow currency exchanges for the purchase of newsprint. Already, one newspaper has warned that it will run out of newsprint by April.

Marcel Granier, the director of RCTV, one of the nation's most-watched television networks, said he has been unable to pay foreign suppliers for new programming or videotape since the government put the currency exchange controls in place last month.

In a fascist government, the media are targeted from Day One, Granier said. He is the one who has mounted a media war.

Begin optional trim

There are also at least four new laws under consideration that could affect media operations. One would appoint vigilance councils composed of local citizens to oversee and advise on editorial content. Another content law would restrict what news programs could show.

Jesse Chacon, the general director of the National Commission on Telecommunications, which oversees media licenses, said the government is simply seeking a way to ensure more balanced coverage.

Pretending that there should be no regulation because the media can regulate themselves is not acceptable, Chacon said. Their power has to be managed. They haven't been elected, but they have the power to topple a government.

(End optional trim)

The members of the disparate opposition accuse Chavez of launching an ill-fated social revolution that has instead driven the country further into poverty and political ruin.

The president has refused to make any concessions, insisting that the only legal means to force him from power would be a midterm recall election that could take place as early as August.

Instead, he recently announced that this year will be the year of the offensive of his Bolivarian revolution, which seeks to improve the lives of the 80 percent of the country that lives in poverty.

He has promised to implement long-delayed plans that call for a redistribution of land to the poor. And he has begun a program in which the government uses air force planes and navy ships to import food at reduced costs to sell at popular markets for the poor.

In a speech to university students last week, Chavez claimed victory over the conspirators, terrorists and fascists who tried to stop his reform plans.

We are defeating them, and we will always defeat them. On our side is morality, reason and victory, he said.

In several interviews, opposition leaders downplayed the seriousness of the fissures in their ranks, which they said were to be expected after the strike's failure and given the possibility of an upcoming election.

Instead, they portrayed a new strategy: The opposition will take a low profile over the coming months as the economy slowly collapses, reaching a nadir of high inflation and unemployment in August -- the same month as the possible election.

Crime and joblessness have already risen sharply since the last election, making life miserable for many of the poor, who form the core of Chavez's constituency.

The hope is that the voting public will forget that the opposition-led strike has been responsible for much of Venezuela's economic problems and will turn their fury against Chavez.

I think we should lower our profile and let the crisis create its own dynamic and go with it, Salas said. You have to let people rest a bit.

That comes as little comfort to the millions of Venezuelans who are suffering the effects of a country in dire economic straits.

Wilbur Caseres, 25, is a taxi driver studying to be a lawyer. In the last three weeks, he's been robbed twice -- the latter time by a passenger who was nine months pregnant.

He foiled the attempted robbery by hitting the brakes and pulling over next to a policeman. The sobbing woman explained that she had three children at home and needed money to pay for their food as well as the upcoming birth of her fourth.

The police officer emptied the bullets from the gun the woman was carrying and gave it back to her, telling her to sell it. Then he gave her $12, and Caseres added another $12.

That's just how things are now, Caseres said.