More gains for oil futures March 25, 2003: 11:33 AM EST

LONDON (Reuters) - World oil prices extended gains Tuesday as Iraq resisted a U.S. military thrust toward Baghdad and tribal violence in Nigeria kept shut nearly 40 percent of the country's crude output.

U.S. light crude gained 61 cents to $29.27 a barrel after a $1.75 jump Monday. London Brent crude added 45 cents to $26.54 a barrel.

U.S. and British forces faced tough resistance from Iraqi fighters as they opened an assault on Republican Guards defending approaches to Baghdad, the Iraqi capital, in a campaign aimed to oust President Saddam Hussein.

Oil fell 25 percent last week as traders bet on a short war with little damage to Iraq's oil industry, which exported 1.7 million barrels a day to the 77 million bpd world market before the conflict.

But confidence in a quick war waned after the weekend as U.S. and British forces suffered casualties and saw slower progress.

"The market is responding to difficulties in the Iraq campaign. It had priced in the perfect war and had gone so far as building in a victory discount, which is now being eroded," Sydney, Australia-based oil analyst Simon Games-Thomas said.

A series of bloody clashes in Nigeria forced closure at the weekend of just over 800,000 barrels per day (bpd) of the 2.2 million bpd produced by Western oil firms in the African OPEC nation.

Ethnic groups in the Niger Delta are battling for a greater share of the country's oil wealth.

Nigeria is one of the top six oil exporters to the United States, where fuel supplies have been running at 27-year lows partly due to a Venezuelan general strike.

Nigeria averaged 560,000 bpd to U.S. refiners last year, where its crude is valued for its high gasoline content. Nigeria also exports to Europe and Asia.

"Nigerian crude is not the kind of stuff you want to be short of," said Paul Horsnell, oil analyst at J.P. Morgan. "It's very serious. It's not a little local disturbance."

The Organization of the Petroleum Exporting Countries could make up any shortfall in supply from Nigeria, OPEC's fifth largest producer, OPEC President Abdullah al-Attiyah said Monday.

The group has also pledged to make up for the disruption to Iraqi exports but now has only the slimmest of spare capacity cushions.  

DOW JONES NEWSWIRES Tuesday March 25, 2:20 PM By Irene Kwek Of DOW JONES NEWSWIRES

SINGAPORE (Dow Jones)--Crude oil futures continued to extend gains in after-hours trading Tuesday, as growing concerns of a prolonged war against Iraq and worries over Nigerian oil output helped to lift the entire petroleum complex.

Front-month May crude futures headed higher in Access trade during most of the Asia day, and hit a session high at $29.05 a barrel. At 0600 GMT, Nymex May was up 34 cents at $29.00/bbl after surging 6.5% during floor trade Monday.

"It's relatively bullish with the fundamental underlying strength coming from Nigeria and the Iraq (war)," a broker said, adding that he expected the buying from London and U.S. traders to continue later in the day.

Initial resistance for the front-month contract was at $29.50/bbl, and then at the 200-day moving average of $29.63/bbl, the broker added.

"The realization set in that this would be a longer war than the enthusiasm showed in the market last week," a U.S.-based broker said.

The gains by crude helped to lift Asian oil product prices. Singapore fuel oil cash prices were pegged at $170-$171 a metric ton from $164.50/ton Monday. Fuel oil swaps climbed to $161.25-$164.50/ton from $157.50/ton Monday.

Open-spec naphtha outright prices were pegged at $281-$283/ton for second-half May, cost-and-freight Japan, compared with $273.50/ton done Tuesday.

Rally Likely To Continue

Looking ahead, analysts and traders expect Nymex crude futures to retest the key $30/bbl level.

"It will probably trade back up and go toward. $30/bbl... It's up almost $2/bbl (since Friday), and it may even go up to $30/bbl tomorrow," the U.S.-based broker said.

Moreover, a flight to quality from investors due to fears of a long war will help support the bullish trend.

"There are signs of the flow of money out of stocks and into gold, commodities. We would see some amount of buying in crude in line with the flight to quality," the broker added.

"It's going to be on the upside because it looks like the war is going to keep dragging on longer than what people have been expecting," echoed a Merrill Lynch energy analyst.

"But the other thing that could keep oil prices in check is that we are not witnessing any destruction of Iraqi oil production facilities and the disruption of oil exports from the Persian Gulf," the analyst noted.

In a report distributed Monday, Merrill Lynch said it adjusted its 30-day range for crude prices downwards to $26.25-$33/bbl "to account for the lack of debilitating supply impact since the onset of hostilities."

Nigerian Oil Output

Further fueling the rally, problems in Nigeria lent further support to the bullish sentiment as ethnic violence has sharply curtailed the country's oil output by as much as 40%. Shell Development Petroleum, a unit of Royal Dutch/Shell (RD) Monday said it shut in 370,000 bbls a day in crude output.

Nigeria was the fifth-largest exporter of crude oil to the U.S. in January, and its crude is valued for high gasoline yields.

May gasoline futures staged a 1.07 cent gain during Access trade to 89.99 cents/gallon at 0542 GMT, underscoring concerns of tight gasoline supplies as the U.S. moves towards its driving season.

In its report, Merrill Lynch noted that the partial outage in Nigerian production highlighted limited spare production capacity among the Organization of Petroleum Exporting Countries, which have been strained by strikes in Venezuela earlier in the year and Iraq, starting last week.

The disruption in Iraq and Nigerian oil output has taken about 3 million barrels/day out of the market. Saudi Arabia and other producers have made up that shortfall, but their ability to absorb shocks is almost exhausted as they are already producing beyond their sustainable capacity.

Despite the reduction in oil output from both Iraq and Nigeria, market participants said they didn't expect a release of stocks from strategic reserves.

"I don't see any sell off" or the market pricing in such a release, said one broker. "If anything, the market is anticipating very little out of the strategic reserves."

The U.S. administration said it is watching Nigeria's oil supply disruption and the broader oil market closely, a U.S. Department of Energy spokesman said late Monday.

The Bush administration maintains that the U.S. hasn't experienced an energy supply disruption severe enough to warrant emergency release of crude oil from the U.S. Strategic Petroleum Reserve, the spokesman said.

On the Iraq war front, market participants are taking account of reports that the oil fields in southern Iraq aren't as secure as assumed last week. Fighting around burning oil wells in the Rumaila oil fields has driven out civilian firefighters, days after they were secured by coalition forces, an official said Monday.

Meanwhile, the Kirkuk oil fields in the Northern remain under Iraqi government control.

-By Irene Kwek, Dow Jones Newswires; +65-64154062; irene.kwek@dowjones.com

"Washington lost" MADRID -- A Spanish judge threw out a terrorism case against Venezuelan President Hugo Chavez because he has immunity from Spanish prosecution, but the case was forwarded to the International Criminal Court in The Hague.

A group of Spanish citizens brought the case against Chavez, alleging terrorism and crimes against humanity based on violence during a protest in Venezuela last April in which three Spaniards were injured and one died. The case also refers to injuries suffered by two Spaniards in Venezuela on Nov. 4. The allegations against Chavez were presented by lawyers acting for some of the families of at least 19 people who were shot dead during a large anti-government march April 11 that came close to the presidential palace in Caracas, the capital.

Nigeria: Double speak By Victor Ahiuma - Young Tuesday, March 25, 2003

AS Nigerians groan under the torturing fuel crisis despite being a major producer of the products, president of the National Union of Petroleum and Natural Gas Workers (NUPENG), Comrade Peter Akpatason, in this chat with EnergyThisWeek, gives insight to reasons for the un-ending fuel scarcity in the country.  He also speaks on the union's  preparedness to take on alleged anti-labour practices and employers in the industry.

Excerpts:

What is the union’s position on the un-ending fuel crisis?

Well, our position is that the government has not been sincere about its efforts to address the issue from the onset.  They made a mistake in attempting to give Nigerians the impression that the only way to solve the problem of fuel scarcity is to increase the pump price.  They wanted to increase the fuel price as a result of that they had to seize the opportunity of the gulf war threat as well as the Venezuela problem to create the artificial scarcity situation that we have.

The truth is that government has always been in a position to forecast such situations and make arrangements to forestall such developments or to absorb such shocks. That is what happens elsewhere in the world. People have reserves to address problems     like this.

Unfortunately, we don’ t have reserves in Nigeria. The government at the moment, rather than think of how to find solution of the fuel scarcity, is actually waiting to use that as an opportunity to increase prices. That exactly is why they have not been able to address the problem.

We want to see the attempt by major marketers to push for a price  hike as a furtherance of government plans. They are just acting as agents of government to give Nigerians the impression that without price  increase, it would not be possible to address the problem. But the truth is that government has all it takes to address the problem. They get a lot of revenue as a result of this increase in crude prices. What they are getting is so much that they can use just a little of it to subsidise the import for this period and after which the situation might stabilize and we would go back to the normal where they would not have to subsidize beyond what it is presently. But unfortunately,  because of their insensitivity to the needs and  problems of Nigerians, they have not bothered to do that. I think they owe us a duty in that respect.

The authorities have talked about low production of the local refineries and heavy dependance on import. Why is it that up till now,  we still talk about low capacity utilisation, can’t the government do something to increase the capacity of  local refineries?

Part of the insincerity of government is manifest in the area of refinery maintenance. They have always come out with programme of maintenance. The last one they came out with was so uptismistic. They gave us the impression that by June last year, everything would have been all right. Again, unfortunately, they did not do much. So, we want to believe that it is not as if they don’t have the solution to it or the idea as to how to solve the problem. But what happens is that, this same politicians who are the policy makers, they are the core investors who want to sell NNPC to themselves. So they want to perpetuate this situation. They want the situation to persist such that Nigerians will believe that the best way out is to sell NNPC and its subsidiaries. They are creating the ground for themselves to buy the corporations’  subsidiaries. It is not going to be good for Nigeria because these people don’t actually have the interest of Nigerians at heart. Most of them fraudulently acquired their wealth from public treasury and they want to use the same public wealth to buy public companies, to own them and turn public monopoly to private monopoly without actually attempting to really solve the problem of NNPC. We want to believe that if they really want to solve the problem of the refineries, they have the resources to turn around the refineries to make them work. Not by politicizing issues. Not by awarding contracts to companies that lack the technical and other resources to make the refineries work. If they are sincere, they will award the contract to competent contractors. The oil wells are flowing. There are buyers who we are exporting oil to. The money is coming. They divert too much of the money into politics. They should use part of the money to make the refineries work. Let the technocrats, let those who have the technical know how be involved in this  repairs not for politicians who know nothing about the technical management of refineries to take charge. That is what is killing the country. We don’t see the sincerity of the present government and the party in power to address the problems of this country. Rather than address problems, you see top party officials saying all sort of funny things about workers resistant to privatisation of public companies. Like the chairman of PDP, Chief Audu Ogbeh said recently. I think that is not a very responsible way of talking. They should make very visible and responsible efforts to solve this problem.

How does the face-off in the gulf impact and relate to the crisis in the country?

The crisis in the gulf has not affected  other countries the way it is affecting Nigeria. I said earlier that they are just using that opportunity to attempt to increase prices. Actually, we agree that crude prices went up and could still go up. There are two implications. One, the refineries in Europe and other parts of the world where we import refined products, they will definitely have their prices up because the crude, the raw material for refining the products has gone up. So, whatever we import is very likely that the prices would also go up. But another implication is that as a result of the crisis in the gulf region and the Venezuela problem, the crude we sell in this country has increase in quantity and the prices have also gone up. So a lot of money is accruing to the federal government. So, if so much is accruing to the government much more than what goes out or what will possibly go out as subsidy to get more fuel for Nigerians, then they don’t have reason for not been able to address this problem. They only lack the foresight to look at the situation as it was coming and have continency arrangement to checkmate the present suffering that Nigerians are passing through.

Do you think this time, it is politically wise to talk about pump price increase?

That is the blunder they are making. That is why they are coming up with a lot of unreasonable explanations and excuses like accusing sabotuers that are not existing. We believe that if there are saboturs at all, they are politicians in power. There are government  officials who are sabotaging Nigerians’ efforts, who are sabotaging the efforts of oil workers in Nigeria, who are diverting money that ought to be used for more important thing into political campaigns and all sort of things . I think it is unfortunate and we in NUPENG are not happy about it. I know every responsible Nigerian is not happy about such development. The government needs to be forthright on issues. As for this one, they are not serious. I think it is very clear to them now that it is a wrong time to talk of increasing pump prices. That would not solve the problem any, way. It will be suicide  mission to embark upon. If they do it, well only God knows what will happen but I know Nigerians would not be stupid enough to ask such people to come back, if they dare it this time. But for our union, as usual, you should know we will react. We will react in some new ways,  not necessarily the way we use to do it. But definitely, we will make it very difficult for them. I will believe it is not going to be possible.

Recently, your union sent a petition to the minister of employment, labour and productivity intimating him, about unfavourable industrial situation in the industry and your resolve to tackle it head on. What is the situation now?

Well, the situation still remain the same. It is only one of them that I think his done a little improvement. In Eleme Petro Chemical Company Limited (EPCL), Port Harcourt, we are made to understand that NNPC has retired, instead of reinstating workers that were sacked because of their union activities. That is a far cry from our expectation. But all the same,  because the people affected have decided to take it in good faith, we have decided also, to accept it like that. But in other areas like the contract workers in Shell, they are still facing the same problem. In fact, the situation is worsening. We are so surprised that the DGM of NAPIMS who is supposed to be a Nigerian and reason like other Nigerians in terms of the welfare of working in the industry has decided to turn the other way round. Rather than address an issue that was brought before him on the instruction of the Group Managing Director (GMD) of NNPC, we are surprised that he decided to take side with the multi-nationals. In fact, he made comments that are very unethical which we think are not good for the industry. But we are going to react. We are going to write the GMD of NNPC complaining about the activities and role of the DGM of NAPIMS and also to put the industry on an alert about our reaction to it. Definitely we are going to take on the industry. We are not going to allow Shell to just throw out that workers and change the contracting formular in the industry. There is a new development too. Just after the Shell issue, Chevron has also come up with something similar. Chevron is also pointing at the same DGM of NAPIMS. It appears he has some thing he is benefitting personally from that and as a result of that, he is all out to destroy the industry. But NUPENG will make sure we resist that. In fact, NUPENG and our petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), we are in concert, as a team in doing that. We are going to ensure that this neo-colonialism and re-colonialism is resisted vehemently. If it involves taking him as an individual or personalising it, we will do it with the man and we will take on every company in the industry that has decided to be anti-labour. On the case of Mike Adenuga and his management team  in National oil, they have cleverly converted the sacking of our vice president to early retirement which for now we have not got the details. But one thing is clear, the man is out of employment for now as we are talking.

We are definitely not happy about that. They are also some other people in Belbop for instance who also are staff of that same conglomerate belonging to Chief Adenuga. They have been put out of job for more than a year now because they are members of workers’ union. Management attitude towards union in that place is so discouraging and we are going to resist that culture. If it is allowed to continue, it will definitely create problem. The syndrome will spread round the industry just like the Shell contract is going round the entire industry now. The union is very set at this moment to resist all those anti-labour employers. We are particular about those ones we have mentioned. There are a lot of others. You have the owner of Lonestar and Deutag who is completely anti-labour. He uses community influence, he uses all sort of crude measures to fight the union. He goes to court at will. He takes union from upper court to lower court. If he is defeated in an upper court, he goes to a lower court which is actually not the right thing to do. He claims he has the money and the influence to do whatever he wants and has decided he would continue to give us problem.

In Delta presently, you can imagine a situation where a whole rig is manned by expatriates and contract workers.  No Nigerian staff. Every Nigerian there is a casual worker. That is against Nigerian labour law. Unfortunately,  because we do not have effective judicial system and modern labour laws in place and our politicians are not ready to protect Nigerian workers they do what ever they like. Some of these multi-nationals and core investors take laws into their hands. It is very bad. But we are not going to sit down and lament. We will take them head on.

<a href=www.nytimes.com>The war in Iraq is not all bad By CLAUDIA H. DEUTSCH

No one in the chemical industry will come out and say it. But the truth is, for chemical companies, the war in Iraq is not all bad.

Executives know that in times of war, people harbor nagging fears that burning Iraqi oil fields and rampant unrest in neighboring countries could quench the flow of oil and send prices up sharply, inevitably pushing gas prices up as well. And that, they think, makes the timing right to push Washington for energy policies that will at least curb the volatility of gas and oil prices.

"The fact that we are having a war reminds us again of the fact that we have to come to grips with a U.S. energy policy," said Greg Lebedev, president of the American Chemistry Council, the industry's main trade association.

To be sure, the industry has a lot to worry about. Its major input, oil, is expensive, and its outputs go to many cyclical industries that will weaken as a war wears on.

Even so, few industry experts think that war will drive oil or gas prices significantly higher. The severe winter, coupled with the long run-up to war, did that months ago. "The rise in natural gas prices was extraordinary over the last three months," said Klaus Peter Löbbe, chairman of BASF. "Some of that was the severe winter, but without the threat of war, prices would never have been this volatile."

Now, the weather is warming up, and there is no longer uncertainty about war. For two weeks, oil and natural gas prices crept down, until yesterday, when oil prices surged 6.50 percent and natural gas 2.44 percent.

"A week ago, I'd have said that as soon as planes start flying, energy prices would go through the roof," said William S. Stavropoulos, chairman of the Dow Chemical Company. "But Saudi Arabia is producing full out, Venezuela is coming back slowly, and it doesn't look like there will be huge damage to Iraqi oil fields."

The chemical industry has a lot at stake in whether the oil keeps flowing. It uses oil and gas as raw materials as well as fuel.

Thus, the council did not wait for war to break out to use it as a platform for seeking help. On March 11, the council led a campaign to press the government to work with Canada and Mexico to increase the supply of natural gas in North America, to cut consumption by governmental agencies and to encourage conservation among consumers and companies. It also asked that the president not support either environmental regulations that discourage drilling in new areas or those that offer incentives to switch from coal to natural gas, thus causing a run on already tight supplies of natural gas.

Natural gas now sells for $5 to $6 per million British thermal units, a sharp drop from the $19 price of late February, but more than twice the $2.50 per million B.T.U.'s the industry had grown accustomed to. Similarly, oil prices have dropped more than $10, to less than $30, but that is still well above the $20 the industry considers acceptable.

"After the last few months, $5 for natural gas may not look so bad, but it still is not cheap," said Frank J. Mitsch, a chemical industry analyst at Bear, Stearns, who said that when all the chemical companies have reported first-quarter results, "we will see a lot of red ink."

The immediate effect is not the same across the industry. The DuPont Company, which derives a large part of its revenue from pharmaceuticals or other products that are not based on hydrocarbons, has kept earnings up. Dow, which makes basic chemicals that are dependent on hydrocarbons, is in the red.

DuPont spent about $2 billion on hydrocarbon fuels and raw materials last year. Dow, a similarly sized company, spent $8 billion. Dow's hydrocarbon costs rose $400 million in the last quarter alone.

"No question," Mr. Stavropoulos said, "the impact of high energy prices has been dramatic for Dow."

But DuPont and companies like it are not home free. They may not buy a lot of hydrocarbons, but their suppliers do. DuPont uses butadiene methanol and cyclohexane ammonia, oil derivatives, to make nylon, while it uses ethane, made from natural gas, in its ethylene polymers.

"There's a four-to-six month lag between the rise of energy prices and its impact on our income statements," said Raymond G. Anderson, DuPont's director for investor relations.

Thus, if the war drags on, or if it spurs terrorist attacks, all bets are off.

"If the war drags on, energy prices really could rise again even as global economies drop," said Mr. Mitsch of Bear, Stearns. "And that could be a real double whammy for the chemical industry."

A Roar, an Explosion, and First Thoughts Are of Terrorism  (April 26, 2002)