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Group says glut of oil shipments is in transit, but exporters should not cut production too quickly.

LONDON (Reuters) - A "wall of oil" is poised to reach importing countries in the second quarter, traditionally the weakest for demand, but producers would be imprudent to cut output too quickly, an industry group said Thursday.

While leading OPEC members more than compensated for disruptions to Iraqi and Nigerian oil supply last month, talk of a cut in output later this month is "premature," the International Energy Agency said in a monthly report.

"I'm not sure that we have to fear an oversupply," the agency's Executive Director Claude Mandil Mandil told an energy conference in Paris.

"Stocks are very low and have to be rebuilt, and to rebuild the market needs extra supply, and all the more because in less than two months the driving season will start and demand will be high," he said.

The Organization of the Petroleum Exporting Countries is planning an emergency meeting, with many members calling for a reduction in output after a drop in prices to near the group's $25 a barrel target.

The IEA indicated fundamental factors pointed to a comfortable stock build for the second quarter, ahead of the summer demand.

Assuming steady production of nearly 26 million bpd from the cartel, without anything from Iraq, stocks would build at about 2.4 million bpd during the slow demand second quarter, IEA figures show.

Recent OPEC production increases have yet to show up in consumer country inventories because refiners have limited purchases in the hope of lower prices after the war on Iraq, the IEA said.

"The net result is a temporary backlog of crude on the water," the agency said. "There has been talk of a 'wall of crude' on the water that is waiting to arrive in key consuming regions," it added.

But for the IEA, adviser on energy to 26 industrialized nations, supply dangers still loom.

Iraq's continued outage, Nigerian disruptions ahead of presidential elections and Venezuela's underperforming output after an opposition strike make for uncertainties, it said.

Market attention has shifted from fears of a shortage to fears of a glut after OPEC members led by Venezuela, Saudi Arabia and Kuwait were able to compensate for lost output in March due to the attack on Iraq and violence in Nigeria.

The 11-member group boosted production by 95,000 bpd to a total 27.31 million bpd last month, the IEA said.

"Consumers are growing increasingly confident that the market can weather the storm caused by concurrent supply disruptions in Iraq, Venezuela and Nigeria," it said.

Excluding Iraq, the members governed by output limits lifted production by 1.13 million bpd to 25.86 million bpd.

This is 1.4 million bpd over the group's production target, the bulk of that from Saudi Arabia, which boosted production to an estimated 9.32 million bpd in March, the report said. In the second half of March, Saudi output was over 9.5 million bpd.

The IEA said Venezuelan production had recovered from a crippling opposition strike more quickly than expected, averaging 2.1 million bpd by the end of the month. But it said output may rise only another 300,000 bpd because some 400,000 bpd of capacity had been lost during the strike.

But now the nine members of OPEC -- excluding Iraq, and Venezuela -- have only 1.23 million barrels per day bpd of spare capacity, down from 1.67 million bpd in February, it said.

Global oil production in March jumped 740,000 bpd to 80.27 million bpd, up 4.44 million bpd from a year ago, but more than half of that was non-conventional OPEC natural gas liquids and oils, including the restart of very heavy oil production in Venezuela.

World oil demand is expected to grow by 1.1 million barrels a day this year to 78 million bpd, a forecast steady from its previous report, the IEA said.  

Amnesty International AI Index: AMR 53/006/2003 Publish date: 10 April 2003

A year on from the failed Coup d'Etat of 11 - 14 April 2002, when more than 50 people lost their lives and scores of others were wounded, Venezuela's government and opposition have failed to face up to their part in the tragedy and ensure that those responsible are brought to justice, Amnesty International said today.

An Amnesty International report "It is time that both the government and opposition stop attempting to use the events of April 11 to serve their political agendas and instead create the climate in which the facts can be established, justice can be secured and the victims can receive reparations."

"The recent dismissal of murder charges against those accused of shooting from the Puente Llaguno, and the failure to charge Metropolitan Police implicated in the deaths and injuries suffered on 11 April, demonstrate the weakness of the official investigation. It also raises serious concerns about the capacity of the state to effectively prosecute all those responsible," the organization continued.

Alixis Gustavo Bornones Soteldo and César Mattías Ochoa were two of the victims who were shot and killed in Avenida Beralt on 11 April. Their families, and many others, are still waiting for justice. Important investigations in order to identify those responsible have already been carried out, but Amnesty International remains concerned that establishing individual criminal responsibility for the crimes remains a long way off. Furthermore, while there has been a degree of progress in the investigations regarding events of April 11, the organization fears that the violations committed on 12, 13, and 14 April have received less attention and risk being ignored by investigators and public alike.

"The investigation and judicial process must lead to justice for the victims and their relatives, in order to avoid the pattern of impunity of other notorious cases of serious human rights violations which haunt Venezuela's recent history," said Amnesty International.

"Impunity for human rights violations leaves the victims and their families without redress and encourages further violations. This can only fuel the climate of violence undermining the rule of law and human rights in Venezuela."

To ensure the success of the investigations, Amnesty International urges the authorities to guarantee that all agencies, including all police forces and the National Guard, cooperate fully with the investigation and ensure there is transparent and effective coordination between the Attorney General's Office (Fiscalía General de la República) and the Scientific and Criminal Investigation Force Cuerpo de Investigaciones Científicas, Penales y Criminalisticas (CICPC).

"It is vital that both these agencies receive the support and resources necessary to make their work timely and effective. The judiciary must also play a fundamental role by ensuring its timely, impartial and effective handling of these highly politicised cases; the executive and the legislature must ensure support for the investigation while avoiding any implication of undue influence on the results, " said Amnesty International.

"If the responsibility, both criminal and moral, for violence of April 2002 is to be established it is vital that the opposition, including the media, contribute to the clarification of the facts, even if these do not coincide with their immediate political interests."

A proposed commission of enquiry, to establish the truth surrounding the human rights violations committed in April 2002, has not been set up due to the failure of the opposition and government to guarantee its independence, impartiality and effectiveness. Amnesty International believes that another possible means of ensuring an impartial and credible enquiry could involve the participation of independent international experts, under the auspices of the international community, to visit Venezuela to evaluate the investigation and make binding recommendations. These mechanisms would be a step toward creating space and credibility for the facts of April to emerge from the political polarization affecting the country. "One of the challenges to any such investigation is to clarify what led to the violence and the responsibility for it. Since April 2002, the political crisis destabilising Venezuela has repeatedly led to violence, with the police and National Guard employing excessive force against pro and anti-government demonstrators."

" An outcome of these investigations must be the urgent reform to policing practices and structures to ensure impartial law enforcement and prevent excessive or indiscriminate use of force in police operations with strict adherence to international human rights standards."

"Impartial and effective investigations into human rights violations committed in April 2002 and subsequent incidents are the only means of rebuilding confidence in the police and criminal justice system and ending the climate of impunity," Amnesty International concluded.

Background Economic, social and political tensions led to an indefinite strike on 9 April by supporters of the opposition, an alliance built around the business sector, the principal trade union and private media interests, who demanded the immediate resignation of President Chávez. On 11 April, a mass opposition demonstration met pro-government protesters in the vicinity of the presidential palace. As demonstrators, Metropolitan Police, National Guard clashed, 20 people died as a result of gunshot wounds, and over 60 others were injured. In the ensuing crisis, senior military officials forced President Chávez from power and placed him in detention. Following the Coup d'Etat, a de facto joint civilian-military administration was established under the opposition leader Pedro Carmona, head of the Employers Association, FEDECAMARAS. The de facto government issued draconian decrees, inclusing the closure of the National Assembly, and the summary dismissal of the Supreme Court, the Attorney General and the Human Rights Ombudsman (Defensor del Pueblo). Police carried out raids on a number of homes of supporters of President Chávez. Amongst those arbitrarily detained were a Minister and a National Assembly deputy. There was widespread condemnation of the unconstitutional and summary removal of President Chávez, the illegal detention of his supporters, and the arbitrary powers assumed by the de facto government. This, coupled with the increasingly determined efforts of President Chávez's followers to secure his release and return to power, led to the resignation of the new government and reinstatement of President Chávez on 14 April. The civil disturbance during these four days left at least 50 people dead and many more wounded. The government and opposition have continually accused each other of masterminding the violence for political advantage over the last year.

Political violence has also continued throughout the last year, resulting in the deaths of a number of pro and anti-government demonstrators and has repeatedly threatened further disintegration in the rule of law and human rights protection. In December 2002 the opposition called a second indefinite national stoppage which continued to February 2003. Social tension and political violence escalated in the context of the strike, which had a dramatic impact on the economy. Negotiations between government and opposition have continued throughout the year under the stewardship of the Secretary General of the Organization of American States, César Gaviria. A group of "friendly counties" was also established to facilitate this process and help find a negotiated solution to the political crisis.

Read more: <a href=web.amnesty.org>Venezuela, A Human Rights Agenda for the Current Crisis

LE MONDE | 10.04.03 | 15h30

A force de chercher constamment à anticiper les événements, les marchés financiers ont pris une longueur d'avance sur la réalité. A tel point que leur réaction à l'arrivée des chars américains au cœur de Bagdad, mercredi 9 avril, pouvait paraître surprenante : aucune envolée boursière, bien au contraire ; les marchés obligataires se sont redressés grâce à un mouvement de vases communicants des capitaux en provenance des actions ; et le dollar, qui évoluait jusqu'alors au son des victoires remportées par les troupes américaines, s'est replié.

REPLI BOURSIER

Aux Etats-Unis, l'indice Dow Jones des trente premières capitalisations industrielles a reculé de 1,22 %, pour finir la séance de mercredi à 8 197,94 points.

L'indice composite du Nasdaq (sociétés de technologie) a chuté de 1,89 %, à 1 356,74 points. En Europe, seul le marché allemand, dont les horaires lui permettent de suivre plus longtemps la séance de New York, a reproduit un recul aussi prononcé qu'aux Etats-Unis. Il a cédé 1,22 %, à 2 734,10 points. Les autres Bourses européennes ont nettement moins perdu, à l'instar de l'indice Footsie de Londres, qui a baissé de 0,19 % pour finir à 3 861,40 points. Variation identique à Paris, où l'indice CAC 40 a terminé à 2 888,03 points. Enfin, l'euro, qui avait gagné du terrain sur le dollar, conservait son avance, jeudi matin 10 avril, à 1,0789 dollar. Ces mouvements seraient à attribuer à des investisseurs qui, considérant la guerre quasi terminée, reviennent aux "fondamentaux" moroses de l'économie.

UNE ÉCONOMIE EN ATTENTE

Les stratèges de marché commencent à ébaucher des scénarios d'après-guerre. "L'économie américaine va continuer de faire de la croissance, mais plus lentement que prévu par le consensus des économistes", estiment les experts de CDC Ixis dans une analyse intitulée "Méfiez-vous de l'idée de reprise rapide de l'économie des Etats-Unis". Les experts ajoutent : "Les déficits budgétaire et commercial vont rester très importants. Dans un an, les taux d'intérêt aux Etats-Unis seront plus hauts (...). Mais entre-temps, surtout pendant les prochains mois, on peut s'attendre que les taux baissent un peu. Les données sur la confiance des consommateurs, la production industrielle, l'utilisation des capacités, le chômage peuvent rester médiocres pendant les prochains deux ou trois mois, et une forte reprise pourrait être retardée jusqu'au deuxième semestre de 2003. Comme l'économie était plus faible que prévu en février et mars, les bénéfices des entreprises risquent d'être décevants pendant les prochaines semaines."

FLUCTUATIONS SUR LE PÉTROLE

L'effondrement du régime irakien n'a pas plus ébranlé le flegme des opérateurs du London Petroleum Exchange, plus préoccupés par la baisse des stocks de brut aux Etats-Unis et la peur d'une réduction de la production qui pourrait être décidée par l'Organisation des pays exportateurs de pétrole (OPEP). Le baril de référence du brent de la mer du Nord pour livraison en mai valait 25,16 dollars, jeudi à l'ouverture à Londres, contre 25,33 dollars la veille.

Reste qu'en dépit d'une hausse de 2,72 %, mercredi, la City parie sur une baisse à long terme des prix du pétrole. "Le plafond de la demande a été atteint en février en raison d'un hiver anormalement froid aux Etats-Unis. Sur le front de l'offre, l'interruption des livraisons irakiennes est largement compensée par le retour à la normale au Venezuela et la hausse de la production saoudienne, qui a même éclipsé les difficultés du Nigeria", assure Kenneth Noorish, du courtier Barclays Capital. La reprise de la production irakienne n'est pas pour demain, même si l'infrastructure irakienne a été sauvegardée, les dégâts aux puits étant jugés minimes. La guerre ne s'est pas étendue aux pays producteurs voisins, l'Arabie saoudite et le Koweït. La prolongation du programme "Pétrole contre nourriture" pour 45 jours devrait être rapidement entérinée par l'ONU, estiment les spécialistes. Toute l'attention se concentre désormais sur la réunion, le 24 avril, de l'OPEP.

"L'évolution dépend de l'ampleur de la réduction de la production que va décider l'organisation. Sa marge de manœuvre est toutefois limitée par la nécessité de ne pas se mettre à dos les Etats-Unis en se montrant trop cupide", souligne John Rigby, analyste du secteur énergétique auprès de la Commerzbank.

Cécile Prudhomme et Marc Roche (à Londres)

The Street.com By Rebecca Byrne Staff Reporter 04/10/2003 11:28 AM EDT

What a difference two months make. Back in February, economists were fretting about a jump in oil prices, saying it could spark another recession. But today, with the end of Saddam Hussein's regime in sight, analysts are wondering whether oil prices could be in for a prolonged slump.

A couple months ago, oil prices shot up to $40 a barrel as tensions with Iraq began to intensify and a strike in Venezuela reduced supplies amid strong seasonal demand. The spike up severely weakened the U.S. economy, leading it to contract in February and March, according to some economists. But now, the Venezuelan strike is over, demand is set to fall off and an end to the Iraq war seems imminent.

While crude oil already has fallen to under $29 a barrel, analysts say prices could continue to drop, possibly to as low as $22 a barrel over the long term, particularly if there is an influx of Iraqi oil into the world markets.

A decline in oil prices is certainly good news for the economy, as higher energy prices often act as a tax on the consumer. Still, economists warn that higher fuel prices haven't been the only factor hampering the economy in recent months, and a big decline in oil prices won't necessarily cure all of the market's ills.

"The mini-inventory cycle that has recently gripped the automotive industry ... is currently depressing factory activity," said ABN Amro chief economist Steven Ricchiuto. "The tightening of lending standards being applied to the consumer sector by domestic financial institutions is also a significant growth concern, [and] the seemingly endless corporate cost-cutting initiatives are clearly sapping the vitality from the recovery."

Still, a fall in oil prices wouldn't hurt. Iraq holds the world's second-largest oil reserve after Saudi Arabia, with more than 112 billion barrels of oil. Because about 90% of the land is unexplored, some experts believe that the reserves could be even larger. And because Iraq will need billions of dollars to repair its infrastructure after years of sanctions and economic weakness, some analysts think Iraq will be given a free pass to export as much oil as possible once the war is over.

"It's obviously going to have a long-term dampening effect [on oil prices] because it's going to increase supply, or replace supply that hasn't been in the market for 12 years," said Paul Larson, an energy analyst at Morningstar. "Iraq has the second-largest reserves, and it's not even in the top five in terms of production."

Before the war began, Iraq was exporting roughly 2 million barrels of oil per day, down sharply from around 3.5 million barrels before the first gulf war, according to the Energy Information Administration. The EIA, a statistical agency of the Department of Energy, said that the country's production capacity is no higher than 2.9 million barrels per day, with export potential of 2.5 million barrels per day.

One major impediment to producing more oil -- besides U.N. sanctions -- has been that the country lacks the necessary tools and systems. But analysts say new state-of-the-art American technology could help to increase production capacity sharply over the next few years.

"The industry has been in a chronic state of underinvestment for roughly 10 years, so you have immediate rehabilitation needs that are very pressing," said Tyler Dann, an analyst at Banc of America. "The rehabilitation phase and the care of existing assets will take place over the next 12 to 15 months, and then I expect Iraq will come back toward sustainable production of 3 million to 3.2 million barrels per day."

Although it will take some time to negotiate contracts -- some foreign contracts to expand production in Iraq already exist -- and to repair oil facilities, analysts said prices could fall in anticipation of an increase in production.

Iraq has stopped exporting oil since the war began, partly because the buyers of oil weren't sure who they should pay. Saudi Arabia has made up the shortfall, and was recently producing more than 9 million barrels of oil per day, according to industry sources. Once the war is over, however, analysts expect Iraqi production to ramp up again.

Vice President Dick Cheney said Wednesday that he expects Iraq to produce between 2.5 million and 3 million barrels of oil per day by the end of the year -- a number that Fahnestock analyst Fadel Gheit called "conservative."

"Once we get this mess cleaned up, Iraq will open up its oil sector to investment, we're going to lift the sanctions and sponsor all sorts of programs for economic development," Gheit said. "If we apply our technology and expertise, Iraq will have incredible upside potential."

After the steep climb earlier this year, Nymex crude oil is now back down to $28.80 a barrel, and Gheit and Larson said they expect prices to fall to between $22 and $24 going forward. Of course, it's not just Iraq that is prompting talk of lower oil prices. Production in Venezuela is getting back to normal, Nigeria has started pumping oil again and seasonal demand is due to fall in the coming months.

Still, analysts believe Iraq is likely to pressure oil costs over the long term, although prices will ultimately be supported by production cuts from the Organization of Petroleum Exporting Countries. Typically, OPEC considers intervening when the price of oil moves outside a band of $22 to $28 a barrel.

OPEC "tried before to pump as much oil as it could into the market and at the end of the day they got less money for it," Gheit said. "They would rather see a modest cut in production and a modest decline in prices."

On Tuesday, OPEC president Abdullah Hamad bin Al-Attiyah said he is worried about a glut of oil and requested an emergency meeting April 24 to reconsider how much the cartel is producing. OPEC often produces more than its stated goals.

Meanwhile, amid the speculation that oil prices could sag, shares of energy companies have moved lower, with the AMEX Oil Index down 3% for the year. Exxon Mobil (XOM:NYSE - news - commentary) is down 1% year to date, while ChevronTexaco (CVX:NYSE - news - commentary) is off 3%. Oil-service firm Schlumberger (SLB:NYSE - news - commentary) is down more than 10%, although Halliburton (HAL:NYSE - news - commentary) is up 11%. A Halliburton unit won a U.S. government contract to assess and extinguish oil-well fires in Iraq, but missed out on a larger contract for reconstruction in the country.

Reuters, 04.10.03, 2:29 PM ET

PARIS, April 10 (Reuters) - The head of the West's Energy watchdog said on Thursday that OPEC had shown through its sharp increase in oil output to cover for Iraq that the once-feared cartel is no longer a threat to rich nations.

Claude Mandil, executive director of the International Energy Agency, told Reuters that the Organisation of the Petroleum Exporting Countries had demonstrated they share goals with oil importers such as the United States.

"The past months have proved that OPEC and consumers can share a lot of common goals," Mandil said in an interview.

"I don't feel OPEC is a threat. Thirty years ago it was considered so because oil was used as a weapon," he added.

Cartel leader Saudi Arabia, Iran and other OPEC members have lifted oil supplies sharply to cover for the shortfall from Iraq, and other export hitches in Venezuela and Nigeria, helping to cool a spike in prices.

OPEC's reference oil price has slumped from above $33 per barrel last month to below OPEC's target level of $25 this week.

The Paris-based agency was set up in the wake of the 1973 oil crisis, when Arab oil powers placed an embargo on the West. It oversees huge emergency stockpiles to be used in the case of another major supply disruption.

But cooperation between the two bodies has grown to such an extent that the IEA held back from releasing stocks when Iraqi exports stopped last month, trusting in OPEC's ability to maintain ample supplies.

OPEC ministers are now discussing a cut in supplies to stop prices falling further.

Mandil said OPEC and oil importers still disagreed over price, and said OPEC's $25 per barrel target was so high as to damage world economic growth. It also constituted a disincentive for companies to hold sufficient inventory levels, he said.

"Price is not a shared goal. I say this price is too high," Mandil said, declining to specify his ideal price.

"We believe the price should be the result of market forces, not market management," he said.