Reuters Tuesday April 1, 4:01 pm ET

NEW YORK (Reuters) - Oil prices fell 4 percent on Tuesday as Nigerian unions called off a planned general strike, raising hopes that oil production halted there by recent ethnic clashes might soon restart.

The move eased fears of further disruption to world oil supplies with Iraq's crude exports halted since near the start of a 13-day U.S.-led invasion.

U.S. light crude slid $1.26 a barrel to $29.78 while London benchmark Brent futures fell 82 cents to $26.36 a barrel. Oil prices are more that $10 a barrel below 12-year highs hit in late February.

Prices fell as Nigeria's biggest union called off a planned three-day strike. "News of the agreement on the Nigerian strike has given the market some breathing room," one London oil trader said.

Recent tribal clashes have shut nearly 40 percent of Nigeria's 2.2 million barrels per day (bpd) of crude production for more than a week. The West African country is one of the top six oil suppliers to the United States and U.S. refiners need Nigeria's high-quality crude to build up gasoline stocks for summer.

Oil companies Shell (London:SHEL.L - News; Amsterdam:RD.AS - News) and ChevronTexaco (NYSE:CVX - News) have said they will not resume operations from Forcados and Escravos in the western Niger Delta region until they can be sure of their staff's safety.

SADDAM SPECULATION

Jitters spurred by the Nigerian and Iraqi supply disruptions have helped support oil prices in recent days since the market fell 25 percent just before the war when dealers took the view that Baghdad would not resist for long.

Tuesday's falls gained pace after Iraq's Information Minister delivered a television message from President Saddam Hussein, fueling speculation that the Iraqi leader may be dead.

"People interpreted the fact that Saddam Hussein did not deliver his own message as 'He is no longer with us,"' said a New York trader.

Prices have come under further pressure from signs that world oil supplies are sufficient to meet lower seasonal demand in the second quarter.

"What's driving prices right now is the offset between supply security fears, balanced against expectations of softer demand, which you normally get at this time of the year," said Kevin Norrish, energy analyst at Barclays Capital.

The Organization of the Petroleum Exporting Countries has compensated for lost Iraqi and Nigerian crude with increased supplies. Top world exporter Saudi Arabia in March hit its highest production level for 21 years.

"As far as the war is concerned, we have lost Iraqi supplies but clearly OPEC (News - Websites)is still managing so far to make up for that," Norrish said.

GASOLINE

Global energy demand on the 77 million bpd world market normally drops about 2 million bpd in the second quarter when warmer weather sets in the United States and Europe.

Demand then picks up again when gasoline consumption for motorists rises during the summer holidays.

Nigeria's high-quality crude, ideal for gasoline production, is missed because it is a popular feedstock among U.S. refiners.

Gasoline stocks in the United States are running well below year-ago levels as the world's biggest consumer of motor fuel gears up for peak demand.

"Looking at where U.S. gasoline inventories are and where prices are, lots will depend now on how soon Venezuela will get its gasoline production back to normal," Barclays' Norrish said.

Venezuela, struggling to get output back on stream after a crippling opposition strike, has said it will this week restart gasoline exports to the United States and expects all refining and exports to return to normal within four to six weeks.

The strike had contributed to extremely tight oil inventories in the West even before the war in Iraq.

Analysts polled by Reuters predict that U.S. government data due on Wednesday will show a large crude stock rise after a week of heavy imports.

Mondo Washington by James Ridgeway April 1st, 2003 12:00 PM

The longer the Iraq war drags on, the better for OPEC. Originally fearing a big American intervention in the oil market, Middle Eastern oil experts are breathing sighs of relief. A top government source in Tehran told the Voice last weekend that Iran now doesn't think the U.S. can trash OPEC, which is fine by the Iranians. Tehran is trying to stay out of the war—if anything, it wants to achieve a modest accommodation with the U.S. The Iranian betting is that the U.S. will have its work cut out just getting the Iraqi oil fields to produce enough to run the country, let alone threaten anybody else. This seems to be a common view among Middle East oilmen. And holding an angry population at bay, the Americans will leave the oil business in the hands of Iraqi technocrats. That leaves them sitting ducks to be picked off by a new dictator, but presumably one picked by the U.S.

The world is awash in oil, and OPEC currently has its hands full trying to keep the price above $25 a barrel so as to guarantee decent returns to the producing countries, as well as a decent return for the Texas independent producers.

The Iraqi oil fields are so dilapidated it will take years to modernize them. Oil industry planners believe Iraq sometime in the future will be able to produce 6 million barrels a day. Before the current hostilities began, production stood at half that amount.

The ideologues around Bush originally dreamed of turning Iraq into an American oil reservoir that could rival any in the world. The Middle East produces some 30 percent of the world's oil, and two-thirds of all reserves are in that region. In 20 years, half the world's exports will come from the area. Saudi Arabia is the largest producer and sits on one-quarter of the world's oil reserves.

The idea was that Iraq, with a modernized industry, could produce quantities of oil sufficient to rival the Saudis. U.S. control of Iraqi oil would not only open up a new supply for the U.S.—where it is anticipated that oil imports will provide two-thirds of the total needs by 2020—but it could also end up changing the entire structure of the energy business. Control of Iraqi oil would allow the U.S. to wield a major counterweight to OPEC, allowing the U.S., not OPEC, to force prices up and down. It would lessen the importance of Saudi Arabia and give the U.S. added clout in its dealings with Russia, Venezuela, and West Africa.

But these bright hopes may well become pipe dreams.

Additional reporting: Phoebe St John, Joanna Khenkine, and Mosi Secret

Channel4000.com

If Anything, Says Abdullah Bin Hamad Al Attiyah, The Producing Nations' Biggest Fear Is A Post-war Price Collapse In the run-up to the war in Iraq, crude oil prices shot to levels not seen since the last Persian Gulf crisis. Since the war began, however, prices have dropped back to earth. Crude oil at the New York Mercantile Exchange is hovering close to $30 a barrel, a far cry from the nearly $40-a-barrel levels seen a few weeks ago. Indeed, according to Geneva-based energy consultancy Petrologistics, the cartel boosted production by 1.3 million barrels a day in March.

Still, with the war's course so uncertain, oil prices are likely to see volatile times in the days and weeks to come. What lies ahead? On Mar. 27, Abdullah bin Hamad Al Attiyah, the president of OPEC and Qatar's Energy Minister, spoke to BusinessWeek's Laura Cohn in Doha, Qatar, about the adequacy of energy supplies, the mood at OPEC, and what will happen to oil prices after the war. Following are edited excerpts of their conversation:

Q: What are you doing to ensure that there will be adequate energy supplies? A: More oil has been produced and brought to the market. That's why the price has dropped dramatically. If you ask yourself, why has the price dropped very dramatically -- almost more than $7 in 10 days? There's more oil in the market, and the world can absorb it. Also, don't forget Venezuela is coming back [into the market as a producer].

If you go back to December [with strikes and unrest in Venezuela], we saw 3 million barrels suddenly disappear...[but it's] coming back. Now, people are concerned about Nigeria, but this is only temporary.

Q: Iraq has asked other Arab nations not to increase their production. What's your reaction to that? A: They had the right to ask. Iraq is a member of OPEC, and anyone as a member of OPEC has the right to discuss [anything] with other members. But OPEC and major oil producers are working together to stabilize the oil markets.

We are not aiming to produce just to produce. We aim to stabilize the oil market. We aim to seek a balance between demand and supply. OPEC is an international organization. It is not a political organization.

Q: How often are you in consultation with your OPEC colleagues? A: Not daily, but we are in consultation all the time. I do a lot of consultation with my OPEC colleagues, with non-OPEC colleagues. We try to see how to manage it. In reality, oil prices are always underestimated.

From 1985-2000, the average price of a barrel of oil was only $18. Sometimes it's exaggerated. When oil prices go to $30, consumers start crying. But when you take the average of the last 15 years, [you see] you shouldn't blame oil producers.

Q: Do you have any plans for an emergency OPEC meeting? A: Why should we meet? There is no shortage of oil. The price has dropped. So it's not [like] we have an agenda that would attract us to meet. If we have something to push us, yes. If there's a big shortage of oil, prices skyrocket, then we [will] have something to say.

My main concern is that after the war, we will see the oil price collapse. Demand and economic growth now are not good. The world is in recession, and this is reflected in consumption. This is a story we have to be very careful about.

Q: If the war drags on, won't oil prices rise again? A: I cannot predict what will happen. Some analysts said once the war starts, oil will reach $100. Do not believe analysts. When I went to America for school in 1970, there was a very famous song [by The Undisputed Truth] that said "Smiling faces sometimes they don't tell the truth." Analysts never give the truth. All scenarios are open. This is my concern.

Q: In your view, why did the price of oil go up so much before the war started? A: It was because of the speculators. They hijacked the oil market. We always said there's a high war premium. It was more than $7. Now the market has become more pragmatic.

Reuters, 04.01.03, 10:54 AM ET CARACAS, Venezuela, April 1 (Reuters) - Venezuela's annualized inflation rose to 34.1 percent in March compared with 17.6 percent a year before, as the oil-rich economy struggled with recession and the aftershocks of a crippling two-month strike, the Central Bank reported on Tuesday. Inflation was 0.8 percent in March compared with 4.2 percent in March 2002. Accumulated inflation to March was 9.4 percent compared with 7 percent a year earlier. Venezuela's inflation closed 2002 at 31.2 percent, the highest level in five years and more than double the 12.3 percent recorded in 2001. Venezuela, the world's No. 5 oil exporter, is struggling with political and economic crisis after the opposition strike aimed at ousting leftist President Hugo Chavez disrupted its vital petroleum output.

<a href=www.khilafah.com>Atrueword.com uploaded 01 Apr 2003

As Mark Twain once noted, prophecy is always difficult, particularly with regards to the future. However, it is a safe bet that as soon as Saddam is toppled one of the first tasks of the America-backed regime will be to restore the US dollar as the nation's oil currency.

In November 2000, Iraq began selling its oil for euros, moving away from the post-World War II standard of the US dollar as the currency of international trade. Whilst seen by many at the time as a bizarre act of political defiance, it has proved beneficial for Iraq, with the euro gaining almost 25% against the dollar during 2001. It now costs around USD$1.05 to buy one Euro.

Iraq's move towards the euro is indicative of a growing trend. Iran has already converted the majority of its central bank reserve funds to the euro, and has hinted at adopting the euro for all oil sales. On December 7th, 2002, the third member of the axis of evil, North Korea, officially dropped the dollar and began using euros for trade. Venezuela, not a member of the axis of evil yet, but a large oil producer nonetheless, is also considering a switch to the euro. More importantly, at its April 14th, 2002 meeting in Spain, OPEC expressed an interest in leaving the dollar in favour of the euro.

If OPEC were to switch to the euro as the standard for oil transactions, it would have serious ramifications for the US economy. Oil-consuming economies would have to flush the dollars out of their central bank holdings and convert them to euros. Some economists estimate that with the market flooded, the US dollar could drop up to 40% in value. As the currency falls, there would be a monetary evacuation by foreign investors abandoning the US stock markets and dollar-denominated assets. Imported products would cost Americans a lot more, and the trade deficit would be magnified.

It is foreign demand for the US dollar that funds the US federal budget deficits. Foreign investors flush with dollars typically look to US treasury securities as a means of secure investment. With a large reduction in such investment, the country could potentially go into default. Things could turn very bad, very quickly.

In May 2004 an additional 10 member nations will join the European Union. At that point, the EU will represent an oil consumer 33% larger than the United States. In order to mitigate currency risks, the Europeans will increasingly pressure OPEC to trade in euros, and with the EU at that stage buying over half of OPEC oil production, such a change seems likely.

This is a scenario that America cannot afford to see eventuate. The US will go to any length to fend off an attempt by OPEC to dump greenbacks as its reserve currency. Attacking Iraq and installing a client regime in Baghdad may have a preventative effect. It will certainly ensure that Iraq returns to using dollars and provide a violent example to any other nation in the region contemplating a migration to the euro.

An American-backed junta in Iraq would also enable the US to smash OPEC's hold over oil prices. The US or its client regime could increase Iraqi oil production to levels well beyond OPEC quotas, driving prices down worldwide and weakening the economies of the oil producing nations, thus lessening their likelihood of abandoning the dollar. It would have the short term effect of reducing the profits of domestic oil companies, but the long term effect of securing America's economic hegemony.

The frequently offered canard of the Left that this war is being fought to secure oil revenues for American oil companies may have some truth to it. However, a more plausible explanation may be that the Bush administration is waging war to protect the dollar and smash the OPEC hold over international oil prices. It's a war whose purpose is bigger than Halliburton or Exxon: it's a war being fought to maintain America's position in the world.

Attending the 1992 Earth Summit in Rio, George Bush Senior told the world that, "the American way of life is not negotiable". As cruise missiles rain on Iraq, we are learning just how 'non-negotiable' that way of life really is. Source:  ATrueWord.com