<a href=news.independent.co.uk>news.independent.co.uk By Saeed Shah and Philip Thornton 30 April 2003

BP announced its biggest ever profit bonanza yesterday, making $3.7bn (£2.3bn) in the first quarter of the year, or $41m a day.

The figure – more than double the $1.6bn made for the period last year – was the highest for any quarter and was driven by higher gas and oil prices. During the first three months of the year, the oil price averaged $29.8 a barrel, as the market worried about the Iraq war and disruptions in supply from Nigeria and Venezuela.

Analysts warned however that the outlook was not as rosy and the company also conceded that trading conditions had deteriorated since the end of the quarter.

Peter Hitchens, an analyst at Crédit Agricole, said: "The first quarter was a windfall quarter. Now it's back down to reality."

Underlining the point, the fall in the world price of oil continued to gather pace, amid speculation that it could fall through the $20 a barrel mark. Crude prices fell to their lowest level in five months, with Brent crude in London falling as low as $23.05, its lowest since November and down from a recent peak of $34. Analysts believe Opec, the oil producers' cartel, did not cut production enough last week to prevent a sharp rise in stock levels.

Lord Browne of Madingley, BP's chief executive, said: "The prospect for prices depends upon a particularly wide range of uncertainties, which include the timing and level of the return of Iraqi oil exports and the extent to which Opec's earlier production increases are reversed."

He defended the level of profits made by BP, which he said was good for the whole of the UK. The company stressed that it makes little money through petrol retailing in the UK, which has recently seen an outcry over pump prices. "Increased profits at BP pretty much flow directly into pensions funds [from dividend payments].... We are in the business of making money in a very responsible way, in the service of our shareholders," Lord Browne said.

Turning to Iraq, he said BP's strategy was not dependent on working there, and that the company would only look at opportunities presented by a "future legitimate Iraqi government".

Analysts believe the continued economic weakness combined with the impact of the deadly Sars virus on demand for air travel will continue to knock the oil price. Meanwhile, as the world moves into the second quarter of the year and the cold winter weather fades, the need for Opec oil is swiftly declining. Oil stocks in the US, the world's largest consumer, have risen for two weeks in a row and figures out today will show another rise. The situation could turn out to be like 1997 when Opec watched from the sidelines as the oil price fell below $10 as the unexpected Asian financial crisis sapped demand.

Opec ministers met last week to tackle the sharp fall in the oil price since the swift end to hostilities in the Gulf, which saw oil on New York markets slump from $39.99 a barrel to $25.38. The cartel had been expected to order a definitive cut in output but instead, in effect, legitimised a large portion of the extra supply its members pumped out in the run up to the war.

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, April 29, 2003 By: Jose Gregorio Pineda & Jose Gabriel Angarita

VenAmCham's Jose Gregorio Pineda (chief economist) and Jose Gabriel Angarita (economist) write: More than three months after the exchange controls went into force, first in response to a contraction of oil revenue and then to maintain an adequate stock of foreign reserves (which had fallen to 11.031 billion dollars on January 21, the day the measure was taken), reserves had climbed back to US$14.321 billion as of April 25, regaining $3.290 billion.

When the reserves held by the Central Bank of Venezuela (BCV) are reinforced by the oil industry's recovery and that of oil exports, a total absence of access to foreign exchange is no longer justified because the reserves are on the mend.

What has not improved are the distortions provoked by the exchange and price controls, which put pressure on the supply of goods in the economy. Some industry organizations are deeply concerned over the depletion of inventories and the impossibility of replacing them, because no foreign exchange is available.

The continuity of food supply depends on the speed with which the Foreign Exchange Administration Commission (CADIVI) approves the dollars needed by the processing industries to import raw materials. According to the president of the Venezuelan Food Industry Chamber (CAVIDEA), many companies have shut down production lines and laid-off personnel. Unemployment in that industry is estimated at 26%, and could reach 30% by the end of this year. And similar conditions prevail in other sectors, which have already seen their products disappear from supermarket and grocery shelves ... that is the case for chicken, eggs, and hard white cheese, among other items.

The foregoing does not mean that we will experience supply problems in the very near future, but, if the dollar drought continues over the coming months, the situation for businessmen will become unbearable. They will not be able to keep their companies running and large numbers of jobs will be lost. When the State's emergency import plan to supply the domestic market is added to that prospect, the Venezuela's industry will be even more severely depressed.

The government may have many reasons for keeping the controls in force, but one of the most important barriers to their removal are the fiscal implications such a move might have. The dilemma centers on the combination of interest rates (dependent on the level of liquidity in the economy) and the exchange rate.

The Treasury's massive need for financing requires liquidity to be kept high, in order to put downward pressure on interest rates and make it easier to sell government bonds to the banks ... but in that case, it will be very difficult to return to free currency convertibility.

If, on the other hand, the authorities devalue the exchange rate, that will have a positive effect on the fiscal accounts with which Venezuelans are quite familiar ... but everything will depend on the recovery of oil invoicing and production, which, though quite far along, may not be sufficient to produce a substantial improvement in the government's near-term cash flow.

Article in Spanish

<a href=www.vheadline.com>Venezuela's Electronic News Posted: Tuesday, April 29, 2003 By: Gustavo Coronel

VHeadline.com commentarist Gustavo Coronel writes: When I started to read Miss Kira Marquez-Perez's editorial "Damaging our Venezuela with his fanatical rhetoric", the headline gave me the impression that she was referring to President Chavez ... but I soon found out that the person she saw as doing all that damage to Venezuela was ... ME!

This led me to read the piece more carefully, as I now realized that many of her comments were connected with me.

The first comment she makes is that "Money seems to be the key word for many opponents to the government of President Hugo Chavez..." This is not a fortunate opening, since millions of Venezuelans who reject Chavez do so at the expense of their tranquility and financial stability. I'm sure she knows that.

The implication that we who oppose Chavez for his ineptness, his vulgar and aggressive language, his tolerance of corruption, his lack of real concern for the poor and his authoritarian style of leadership, do it for money is counterproductive to her position.

The world, Miss Marquez, is not only made of criminals and corrupt people, but also of decent and idealistic persons. I assume that you are one of them. I would love to be considered decent too ... unless you have some evidence to the contrary ... in which case you are welcome to come up with it.

Your editorial abounds in adjectives: "greedy, treacherous, opportunistic...."  I would rather read about facts as arguments against my comments. I wrote about facts: explosions taking place, oil spills that are well documented, disarray and anarchy within PDVSA, the guerrilla history of Ali Rodriguez ... who specialized in explosives. I did not invent these things.

Why, then, should my "rhethoric" be fanatical?

A fanatic is someone who asserts something for which he has no shred of proof or one who insists on something against the weight of evidence. Am I in this category?

I know that you are particularly disturbed about what you consider to be my "destabilizing comments about the Venezuelan economy." You feel that I am purposely creating a bad image of Venezuela abroad, out of hatred for Chavez. This is a very important issue and I would like to comment on it. You see, the image of our country is highly damaged ... not by those who oppose Chavez, but by Chavez himself and by his actions.

Let me briefly list some of them: Acceptance of the Colombian narco-guerrillas as friends of Venezuela. The romance with Fidel Castro, one of the last specimens of the Latin American 19th century type dictator. The ideological affinities with the outlaw governments of Hussein and Khadaffi. The authoritarian style of his government. The abysmal mediocrity of his collaborators. The way he has intervened in PDVSA. The manner in which he has divided the country into two tribes: Chavistas and Oligarchs. The flamboyant manner in which he travels around the world in a $65 million airplane, trying to tell others how to run their business when he can not run his own business at home. The aggressive speech and the inconsiderate breach of protocol he systematically commits in international meetings.

I could go on and on, but these examples will suffice to explain the discredit of the Chavez government in international circles.

To criticize this government ... to say that Chavez has led to an economic collapse of the country ... to argue against his exchange and price controls ... the horrendous poverty ... the 120% devaluation, the highest inflation in Latin America ... is not trying to discredit the country but trying to place the blame where the blame has to be placed: in the failure of this government to conduct a reasonable economic program, a political program of democratic coexistence and a sensible social policy.

• We have to make a clear distinction between the love for our nation and being the pimps of this historical freak called Chavez.

When I criticize multinational companies helping Rodriguez' PDVSA, I am not attempting to damage PDVSA or Venezuela. Quite the contrary ... I am saying that the best help PDVSA and Venezuela can obtain is the rapid return of PDVSA to a professional, non-political management. Any help received from multinational companies by the improvised staff running the operations today, will tend to retard the return to the PDVSA that our country needs.

The word "opportunistic" that you mention in your editorial can very properly be applied to the multinational companies which are using the chaos within PDVSA to position themselves.

What I remind them is that such positioning might not be permanent or stable ... unless it is based on sound ethical principles and on the empathy that must exist between the company and the host country, rather than the host government.

In summary, I love Venezuela, therefore I reject Chavez.

Chavez does not speak for my country or for me ... by speaking against his government, I have the conviction that I am not damaging my country but helping it.

It is clear that you feel differently.

I respect your position and I think that your intentions are perfectly honest...

And so are mine...

your friend, Gustavo Coronel

Gustavo Coronel is the founder and president of Agrupacion Pro Calidad de Vida (The Pro-Quality of Life Alliance), a Caracas-based organization devoted to fighting corruption and the promotion of civic education in Latin America, primarily Venezuela. A member of the first board of directors (1975-1979) of Petroleos de Venezuela (PDVSA), following nationalization of Venezuela's oil industry, Coronel has worked in the oil industry for 28 years in the United States, Holland, Indonesia, Algiers and in Venezuela. He is a Distinguished alumnus of the University of Tulsa (USA) where he was a Trustee from 1987 to 1999. Coronel led the Hydrocarbons Division of the Inter-American Development Bank (IADB) in Washington DC for 5 years. The author of three books and many articles on Venezuela ("Curbing Corruption in Venezuela." Journal of Democracy, Vol. 7, No. 3, July, 1996, pp. 157-163), he is a fellow of Harvard University and a member of the Harvard faculty from 1981 to 1983.  In 1998, he was presidential election campaign manager for Henrique Salas Romer and now lives in retirement on the Caribbean island of Margarita where he runs a leading Hotel-Resort.  You may contact Gustavo Coronel at email gustavo@vheadline.com

Prices drop to fresh 5-month lows amid fears of slumping global demand and impact of SARS epidemic.

April 29, 2003: 3:50 PM EDT

NEW YORK (Reuters) - Oil prices fell to fresh five-month lows Tuesday on expectations of rising spare supply in a weak global economy, where the deadly SARS epidemic is biting into energy demand.

Light crude oil for June delivery fell 25 cents to $25.27 a barrel on the New York Mercantile Exchange, coming within 20 cents of the lowest level in 11 months, after losing 20 percent in the past week.

In London, Brent crude fell 26 cents to $23.24 a barrel.

Prices have fallen for the last six sessions after the OPEC cartel last week cut back less than expected of the extra crude it pumped to cover supply during the U.S.-led war on Iraq.

While OPEC presented its deal as a cut of 2 million barrels per day (bpd), analysts said its threshold for the reduction was inflated, reducing the actual impact of the move.

"The market is still living through the aftermath of the OPEC meeting. It is surprised and disappointed with OPEC's decision," Societe Generale analyst Frederic Laserre said. "Now everyone is looking to see if U.S. crude stocks have risen again -- that will confirm the trend of a stock build and show that there is indeed a lot of oil out there."

Oil stocks in the United States, the world's largest consumer, have risen for two consecutive weeks. Analysts predict that new data Wednesday will show they rose again last week, pumped up by strong imports from OPEC.

OPEC raised production well beyond formal quota limits in March to keep oil prices under control ahead of war in Iraq and make up for supply disruptions from a strike in Venezuela and ethnic strife in Nigeria.

Helping weak economies

The increased OPEC supply, particularly from Saudi Arabia, has helped bring oil prices below the $30 a barrel level that analysts warn can hurt global economic growth.

"A period of moderate prices would be very helpful for the world economy," said Jean-Phillippe Cotis with the Organization for Economic Co-operation and Development (OECD).

Also weighing on prices, the International Energy Agency has said it may have to cut its world oil demand forecast for this year as the deadly SARS virus combines with other factors to hit economic growth.

OPEC has said it expected Severe Acute Respiratory Syndrome to hit Asian demand alone by some 300,000 bpd mainly due to declining air travel. The epidemic coincides with the second quarter, when oil demand falls about 2 million bpd from its winter peaks.

"SARS is one of the elements contributing to the fact demand is not very, very high in general. Economic growth and therefore consumption are not as strong as it might be," IEA Executive Director Claude Mandil said Monday.

Weekly air traffic data released Tuesday showed that European airlines had seen demand for seats to the Far East plunge by almost a third from week-ago levels. Asia's Singapore Airlines has cut capacity as much as 10 percent.

"We are now entering the secondary effect phase of SARS when we see a slowdown in the overall economy and less industrial production," said Societe Generale's Laserre.  

By Alex Kennedy

Caracas, April 29 (<a href=quote.bloomberg.com>Bloomberg) -- Venezuela won't bow to pressure from other countries that may seek an agreement for a binding referendum on President Hugo Chavez's rule during a visit next week.

We won't accept any kind of pressure,'' Vice President Jose Vicente Rangel told reporters. Venezuela is not a colony.''

Representatives from six countries, including the U.S. and Spain and known as the Group of Friends, will probably visit Venezuela between May 6 and May 8, Rangel said.

Chavez refused last week to sign an agreement on a referendum reached 10 days earlier by opposition and government negotiators and brokered by Organization of American States Secretary General Cesar Gaviria. Under Venezuela's constitution, a referendum vote can be held at the mid-point of Chavez's six- year term in August.

U.S. Special Envoy for Latin America Otto Reich said earlier this week that the agreement is a test'' for Chavez and not signing it would lead to social chaos and further economic decline.''

Rangel said the comments by U.S. officials are ``silly words.''

We really don't give a damn,'' Rangel said. Some of their comments reflect great ignorance.''

Venezuela's dollar bond due 2027 fell 0.20 cents on the dollar to 63.90, pushing the yield up to 14.74 percent, according to J.P. Morgan Chase & Co. at 3:19 p.m. in New York.

The Caracas Stock Exchange's general index rose 3.1 percent to 8620.07. Last Updated: April 29, 2003 15:20 EDT