<a href=www.sfgate.com>sfgate.comWednesday, April 16, 2003
(04-16) 16:26 PDT CARACAS, Venezuela (AP) --

The U.S. Embassy on Wednesday denied Venezuelan claims that the United States supported last year's short-lived coup against President Hugo Chavez.

Army Gen. Melvin Lopez said Tuesday that Venezuela had proof of U.S. involvement. He said on state television that three U.S. helicopters were in Venezuelan territory during the April 11-14 coup, but didn't elaborate further. "We have the evidence," he said.

"These speculations are unfounded, totally false," U.S. Embassy spokesman John Law told Union Radio on Wednesday.

Law denied any U.S. aircraft was in Venezuelan territory during the coup.

"There was no American plane or helicopter in Venezuelan territory at that date," he said.

Dissident generals rose up against Chavez after 19 Venezuelans died and over 100 were wounded by gunfire as opposition marchers clashed with government supporters in downtown Caracas.

Loyalists in the military helped Chavez regain power on the 14th.

Following his return, Chavez said "worrying details" had emerged suggesting a foreign country might have been involved in his temporary overthrow.

The Bush administration has repeatedly denied that it was involved in the coup.

nzoom.com-Reuters

Oil prices eased Wednesday after the US military said Iraq's oilfields could be pumping at two-thirds of pre-war levels within weeks.

US light crude in New York fell 9 cents to $US29.20 a barrel. Brent crude futures traded in London eased 10 cents to $US25.06 a barrel.

Oil prices have fallen by 30% in a month, as Middle East oil flows have suffered less disruption than feared from the war in Iraq and US ally Saudi Arabia has pumped up exports to cover for lost Iraqi supply.

Colonel Michael Morrow, adviser to US forces chief General Tommy Franks at Central Command in Qatar, told Reuters that Iraq's oilfields would be in a position to pump 1.6 million barrels per day (bpd) within eight weeks.

"Our job is to fix it, get it pumping and let the new Iraqi government decide how to handle the exports," Morrow said.

The resumption of exports could be delayed by uncertainty over who will have the legal authority to issue contracts under the United Nations oil-for-food program, which has overseen Iraq's crude exports since 1996.

"That will take a political decision," Morrow said. "And that's way above my pay grade."

Before the war, Iraq was producing 2.5 million bpd - 1.7 million bpd from its southern fields and 800,000 bpd from the north.

Iraq's northern Kirkuk oilfield was virtually untouched in the war, while the southern fields suffered some sabotage. The US military said on Tuesday that the last blazing oil well had been snuffed out. A fall in oil prices was kept in check by expectations that the Organization of the Petroleum Exporting Countries, which controls more than half the world's crude exports, would cut output at a meeting scheduled for April 24.

Opec producers who were able to do so, chiefly Saudi Arabia, have raised their output to compensate for recent outages from Iraq, Nigeria and Venezuela.

The cartel is now pumping about 2 million bpd above its agreed ceiling of 24.5 million bpd.

Opec now fears further price falls in the second quarter, as demand tails off at the end of winter in the northern hemisphere and the war in Iraq winds down with the country's oil infrastructure largely intact.

"I believe there is a glut in the market," said Opec President Abdullah al-Attiyah. "The surplus is two-plus million barrels per day."

The International Energy Agency on Wednesday urged Opec to be cautious in reducing oil supply to the West, saying prices were still too high for companies to rebuild low stocks.

"I just think Opec should be very cautious before taking strong decisions on output," said IEA chief Claude Mandil, adding that he did not expect Iraqi oil exports to resume within the next few weeks.

"Our view is there is no tidal wave of crude threatening to drown the market," Mandil said.

US crude and refined product stocks last week held at lower-than-normal levels in the run-up to summer vacation driving demand, a government report said Wednesday.

U.S. crude oil stocks rose just 100,000 barrels to 277.2 million. Energy marketanalysts polled by Reuters had forecast a build of 2.5 million barrels.

Crude stocks are still just 3% above 26-year lows hit earlier this year. Gasoline stocks fell 300,000 barrels to 201.9 million and are 6% below last year's level ahead of summer.

nzoom.com

Inflation in the United States was dormant last month outside a jump in energy costs, while groundbreaking for new homes rebounded with surprising vigour after a big weather-related drop, the government said.

The Consumer Price Index, the most popular gauge of US inflation, rose 0.3% last month, the Labor Department said. However, excluding volatile food and energy prices, the CPI was flat - the tamest reading on so-called core inflation since it was last unchanged in February 1999.

"This is more good news on the inflation front. This is a very, very benign number. It's a sign of price stability," said Richard DeKaser, chief economist at National City in Cleveland. Economists had expected the CPI to rise 0.4% and the core index to edge up 0.2%.

A separate report showed housing starts leapt 8.3% last month - the largest gain since September - to a seasonally adjusted 1.780 million unit annual rate, well above the 1.694 million pace analysts had expected.

"Housing starts remain a bright spot in an economy that otherwise seems to be sputtering," said said Dana Johnson, the head of research at Banc One Capital Markets in Chicago.

Johnson and other analysts said the big jump marked an advance from a February level that had been temporarily depressed by unusually harsh winter weather.

Prices for US Treasuries rose a shade and the dollar softened after the data. Stock prices rose at the opening bell, as investors focused on welcome earnings from high-tech bellwethers Intel and Microsoft.

A 4.6% surge in energy costs accounted for more than 90% of the 0.3% rise in the overall CPI, Labor said.

Energy prices rose at an annual rate of nearly 77% over the last three months as oil prices spiked on a workers' strike in oil-rich Venezuela and worries over the potential for supply disruptions as the United States prepared for war against Iraq. However, oil prices began to drop sharply shortly before the war began.

While gasoline prices jumped 4.1% last month, an economist with Labor's Bureau of Labor Statistics said they were likely to be down about 8% in the CPI report for April due out next month, based on Energy Department data.

According to an Energy Department report released on Monday, prices at the pump have fallen 13.3 cents to an average $US1.595 a gallon from the record high reached four weeks ago, just before the United States began bombing Baghdad.

<a href=reuters.com>Reuters Wed April 16, 2003 04:48 PM ET (The following statement was released by the rating agency)

NEW YORK, April 16 - Standard & Poor's Ratings Services said today that it affirmed its 'CCC+' corporate credit rating on Venezuelan state oil company Petroleos de Venezuela S.A. (PDVSA) and revised its outlook on the company to stable from negative.

"The outlook revision follows a similar change to our outlook for the ratings on the Bolivarian Republic of Venezuela, which reflects improving liquidity for the country as a result of recovering oil production against a backdrop of continuing, albeit diminished, economic pressures, and political turmoil. Future ratings changes on PDVSA will be linked to those on Venezuela," said Standard & Poor's credit analyst Bruce Schwartz.

As Venezuela recovers from the political and economic strife that has affected the company during the past year, Standard & Poor's expects that the government will continue to use its authority to exploit PDVSA's financial resources to effectively consolidate the debt management of the republic with PDVSA. This interrelationship has the potential to diminish PDVSA's access to international capital markets and trade credit on favorable terms. Mechanisms to extract cash from PDVSA include royalties, taxes, dividends, use of PDVSA's cash balances to support the bolivar (the Venezuelan currency), and the slow payment on government receivables held by PDVSA.

Standard & Poor's also said that although PDVSA has increased production to between 2.4 million barrels per day and 3.1 million barrels per day from less than 500,000 barrels per day at the peak of the strike, which is much more rapid than had been expected, questions remain about the long-term impact of the strike on PDVSA's production capacity.

Furthermore, Standard & Poor's is concerned about the strike's impact on PDVSA's ability to finance both sustaining capital expenditures and growth initiatives. Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Fixed Income in the left navigation bar, select Credit Ratings Actions.

<a href=reuters.com>Reuters Wed April 16, 2003 03:30 PM ET By Hugh Bronstein

NEW YORK, April 16 (Reuters) - Venezuelan sovereign bond prices shot higher in an otherwise flat market on Wednesday after Standard & Poor's brightened its outlook on the credit ratings of the politically troubled country.

In revising its outlook on Venezuela's long-term ratings to "stable" from "negative," S&P cited improved cash flow in the South American oil-exporting nation -- thanks to recovering crude output.

"That was the big thing today," one emerging debt trader said. "Besides that, the market was just chopping around in a pretty tight range."

Venezuelan total returns rose 1.8 percent in a market that as a whole drifted down 0.03 percent, according to JP Morgan's Emerging Markets Bond Index Plus.

Ricardo Amorim, head of Latin American research at IDEAglobal, said he disagreed with the move by S&P. He noted that Venezuela's upcoming bond swap will leave investors with longer-dated paper, exposing them for a longer period to a country prone to political convulsions.

A year ago, President Hugo Chavez was temporarily forced from office by a coup. And government fiscal accounts bled profusely in December and January when an opposition-led strike brought the nation's key oil sector to its knees.

Chavez's foes accuse him of trying to set up a Cuban-style socialist state.

"If investors accept the swap and lengthen the maturity of the debt they hold, they would potentially have to stick longer with Chavez," Amorim said. "Venezuela is also vulnerable to drops in oil prices, which I expect to happen when Iraq starts to increase its oil production."

Venezuela has said it plans to offer a voluntary, external debt swap during or after the second quarter of this year.

Meanwhile, Amorim characterized Wednesday's overall lull as but a pause in the 11 percent total return rally seen marketwide since the year began.

"The market is a little down today after some profit taking. But I don't believe this is a change in the trend," he said.

With little money to be made in the anemic U.S. stock market or in low-yielding U.S. Treasury bonds, Amorim said, "There will continue to be flows toward emerging markets, in particular toward higher-yielding emerging markets."