January 6 2003

The five-week strike that has paralysed Venezuelan oil shipments is constricting supplies to several Caribbean countries, causing prices to rise and governments to look elsewhere for fuel shipments, officials said.

Venezuela and Trinidad are the main suppliers of refined oil to the region. But as Trinidad and Tobago receives one-third of its crude from Venezuela, it will need to buy crude elsewhere at higher prices if its Venezuelan shipments don't arrive this month.

"Picking it up at a higher price, that is going to affect all of us," Byron Blake, assistant secretary general of the 15-member Caribbean Community, said on Friday.

As Venezuela's general strike affects world oil prices, at least six Caribbean countries, including Guyana and Jamaica, have asked neighbouring Trinidad for help in keeping up reserves of refined oil products, a Trinidadian diplomat in Venezuela said.

"When we receive Venezuelan crude, we first have to take care of our domestic needs and then consider helping our neighbouring countries," Trinidad charge d'affairs Nieves Callender said on Friday.

Under the 1980 San Jose Pact, Venezuela and Mexico provide oil at preferential rates to 11 other Caribbean and Central American countries, including Guatemala, Dominican Republic, Haiti, Honduras, Belize, Nicaragua, Barbados, Costa Rica, El Salvador, Jamaica and Panama.

Other countries, like Trinidad, have separate deals with Venezuela.

Prior to the Venezuelan opposition strike, Venezuela and Mexico each provided 80,000 barrels a day to countries under the pact. But Venezuelan exports have been reduced to a trickle by the protests against President Hugo Chavez's government.

2003-01-05 By Alan Clendenning Associated Press Writer

BRASILIA, Brazil -- Breakfast with Hugo Chavez, dinner with Fidel Castro.

The first day in office for Brazil's new president, Luiz Inacio Lula da Silva, projects the image of a leftist alliance in Latin America, one that Chavez, Venezuela's president, has already nicknamed the "Axis of Good."

Such an alliance could hinder U.S. efforts to create a Free Trade Area of the Americas stretching from Alaska to the tip of Argentina by 2005.

The United States sent trade representative Robert Zoellick to the inauguration, seen by the Brazilians as something of a snub because Zoellick suggested last October that Brazil's only trading partner would be Antarctica if it did not join the hemispheric trade zone.

Silva responded by calling Zoellick "the subsecretary of a subsecretary of a subsecretary" during his election campaign.

At the breakfast meeting, Chavez asked Silva to send technical experts from Brazil's state-owned oil company to replace some of the 30,000 Venezuelan state oil workers who have joined a crippling nationwide strike. Silva said he would consider the request.

And before dining Thursday night with Silva, Castro told Associated Press Television News that Brazilian-Cuban relations will grow stronger now that Brazil has its first elected leftist president.

Castro and Chavez had front- row seats in Congress at Silva's inauguration Wednesday, where an estimated 200,000 Brazilians waved red flags.

The Cuban and Venezuelan leaders had dinner together Thursday.

But experts said Silva's efforts to accommodate Castro and Chavez in Brasilia could be carefully calculated political window dressing.

Silva angered his party's left wing by appointing fiscal moderates to key cabinet posts, but he needs their help to push programs through Congress, where he lacks a majority.

"Embracing Castro and Chavez, the symbols of anti-U.S. influence in Latin America, gets Silva political capital in Brazil," said Stephen Haber, a Latin American expert at the Hoover Institution at Stanford University. "But this is a dangerous game, you go too far one way or the other and this will blow up in your face."

So far, Silva seems to be pleasing his supporters without spooking financial markets. The real, which ended down 35 percent last year, finished stronger Thursday as the market reacted positively to second-tier finance ministry appointments.

Named to the posts were a mix of left-leaning, moderate and liberal economists with strong credentials, along with officials from the administration of former President Fernando Henrique Cardoso.

Chavez coined the "Axis of Good" term after Silva was elected in October, hailing the victory and saying Venezuela, Brazil and Cuba should team up to fight poverty.

U.S. State Department spokesman Richard Boucher would not comment on the possibility of the alliance.

During his breakfast with Silva, Chavez also brought up the idea of increasing cooperation among Latin American state-owned oil industries and setting up a company called Petro-America.

"It would become a sort of Latin American OPEC," Chavez said.

REUTERS[ SUNDAY, JANUARY 05, 2003 05:57:02 PM ]

DOHA: Opec president Abdullah al-Attiyah said on Sunday he expected the cartel to increase crude oil supplies by up to one million barrels per day (bpd) in a bid to quell soaring prices.

"An increase could be anywhere between 500,000 bpd to one million bpd... It will depend on consultations," Attiyah, the oil minister of Qatar, told Reuters.

Unless there is a sharp drop in prices, the cartel is on course to lift supplies in mid-January via its mechanism that stipulates supplies be raised by 500,000 bpd if prices for a basket of OPEC crudes stay over $28 a barrel for 20 days.

The group is not bound by the 500,000 bpd volume. Opec's crude basket was last valued at $30.05 on Thursday, the 13th day the reference price was above $28.

It is still not clear whether Opec ministers will have to meet to raise output or decide by telephone to lift supplies.

"We should decide before January 14 whether the mechanism should be triggered automatically or if there should be an extraordinary meeting," said Attiyah, who from January 1 took over the Opec presidency from Nigeria's Rilwanu Lukman.

"We are still in the consultation process."

Oil prices have rallied sharply on fears that political turmoil in Venezuela will spur a supply crunch in the United States and that a war on Iraq will deepen shortages.

Opec agreed in December to raise output limits by 1.3 million bpd to 23 million bpd from January 1 in a bid to legitimise quota-busting that had left actual output running at 24.5 million bpd prior to a strike in exporter Venezuela.

Their pact to curb output was based on the assumption that Venezuelan supplies would resume imminently, but the strike which has crippled the Opec member's oil operations is now in its fifth week.

Of the 10 countries bound by quotas, only Opec's leading producer Saudi Arabia and its Gulf ally the United Arab Emirates have any significant spare capacity.

Their combined excess volume would be sufficient to replace either Venezuelan or Iraqi exports. But analysts said the unlikely scenario of a simultaneous halt in both countries would test the cartel's supply limits.

From the International Desk Published 1/5/2003 7:08 AM View printer-friendly version

CARACAS, Venezuela, Jan. 5 (UPI) -- Police, the military and the national guard Sunday braced for more gunfire in the streets, after two days of death and woundings have darkened the character of the vast civil divide over whether President Hugo Chavez should go or stay.

Two police officers were hit by ricocheting bullet fragments Saturday in Caracas during a wake held by Chavez supporters for one of two people shot to death Friday, the BBC reported.

CNN reported a woman was also wounded in the jaw Saturday, hit by one of the sniper bullets fired at the funeral home where a Friday's victim was taken.

Although both sides have charged the other with escalating the violence, the source of Friday's deadly gunfire has not been determined.

Pro-Chavez protesters said that on Sunday they would carry the two caskets past the hotel where Organization of American States negotiators have made their headquarters.

During Friday's demonstrations Chavez met with the OAS representatives who have so far have made no progress in trying to mediate the increasingly violent power struggle.

Police have been responding to handgun fire with shotgun pellets, rubber bullets and tear gas.

In the civil unrest now a few days into its second month, the Caracas police try to separate the camps of street demonstrators, but not necessarily as strong allies of the national government, which tried to take control of the police force last last year. Caracas Mayor Alfredo Pena opposes Chavez.

Vice President Jose Vicente Rangel Saturday accused the police of being implicated in Friday's two deaths of what CNN reported were pro-government demonstrators.

Chavez, who shows no sign of stepping down, has said the first opportunity provided under the country's constitution for a referendum vote on his future is August. His government has gone to court to block a non-binding vote Feb. 2 being paid for by private donations. Protestors want him to either resign or schedule a new election.

The demonstrations oon each of the past 35 days had been disorderly up until Friday but not deadly, as managerial and middle class marchers protested Chavez moves toward a left leaning government more resembling that of Cuba as well as of corruption and mismanagement.

As increasing numbers of supporters, mostly drawn from Caracas' strongly pro-Chavez poor, turned out to counter the opposition, gunfire has become more frequent and news videotape after Friday's confrontations showed one man appearing to fire a handgun in the direction of demonstrators.

The street unrest has accompanied the crippling strike by oil industry workers that has sharply cut the OPEC member's oil output, the mainstay of government revenues.

In recent days, Chavez opposition has also begun calling for a boycott of sales tax payments, to further weaken his government. In turn, the government has raised the possibility of martial law.

Chavez has reportedly begun efforts to import a few oil industry workers from Algeria and elsewhere.Five people were injured Friday by the same gunfire that killed two demonstrators outside Caracas' Fort Tiuna, as Chavez supporters threw bottles, fire crackers and rocks at opposition marchers. The opposition demonstrators were showing support for an army general under house arrest inside.

More than six dozen people including seven police officers suffered injuries other than gunshot wounds in Friday's melee.

The government is estimated to be losing about $35 million a day in oil revenues with production at low levels, between 150,000 and 800,000 barrels a day.

Yet the food supply has not been hurt, many small businesses keep operating in the capital city and some gasoline is still being sold to long lines of motorists.

The civil impasse has pressured the world price of oil even as the Venezuelan currency has weakened, getting the attention of countries far removed from South America.

Sun January 5, 2003 09:03 AM ET By Philip Klein

NEW YORK (Reuters) - Stocks could get a boost from positive economic signals this week as the trading year begins in earnest, but fears over international trouble spots Iraq, North Korea and Venezuela will likely temper gains.

Investors are optimistic that 2003 will break the three-year losing streak of major market indexes, and stocks got a head start on Thursday after an upbeat report on December manufacturing sparked one of the strongest opening days ever.

When traders return for the first full week of the year they will be closely watching data on the service sector due on Monday and unemployment figures due on Friday, hoping they will show that last week's positive economic news was no fluke.

"Investor psychology is hoping for a positive '03," said Tim Heekin, director of trading at Thomas Weisel Partners. "I think early on in the year people are going to look to put a little money to work, and I'd like to think we'll have a nice 2 percent to 5 percent move up next week."

For the holiday-shortened week, the Dow Jones industrials .DJI were up 3.6 percent, the S&P 500 .SPX was up 3.8 percent and the NASDAQ .IXIC ended 2.9 percent higher.

President Bush is expected to unveil an economic stimulus package on Tuesday that could include tax cuts on stock dividends.

But uncertainty about expected U.S.-led military action in Iraq, confrontation between the United States and North Korea over nuclear arms and political upheaval in Venezuela will be hanging over the market.

"Based on the landscape globally, even though we do have an improving economy, we're going to see sideways movement and that's all," said Jack Francis, senior trader at UBS Warburg.

WEEK ONE

Next week, investors are expecting volume to improve with institutions returning to full staffing levels after the last two trading weeks were split in half by the Christmas and New Year's holidays.

With signs that the economy is improving and sentiment that the flood of corporate scandals is over, market watchers are optimistic that this will be the first up year for stocks since 1999.

ECONOMIC SIGNALS

The Institute for Supply Management's manufacturing index was well above expectations and spurred a rally on Thursday.

But the report left many analysts questioning whether the numbers reflected real strength in the economy or an aberration.

They may get answers next week when the ISM's report on the service sector is released Monday. If it mirrors the strong manufacturing data, markets could get off to a good start, but a negative report would likely be a major drag on stocks.

"If that number comes out disappointing, you'll probably see indexes test their December lows," said Tom Schrader, head of listed trading at Legg Mason Wood Walker.

As for Friday's release of December unemployment figures, the jobless rate is expected to remain at an 8-year high of 6 percent.

MAJOR CONFLICTS

Schrader said the biggest factor keeping the market down now is that three international crises are happening at the same time -- in Iraq, North Korea and Venezuela.

"It's a general dark cloud, and as much as the Bush administration is trying to play it down, what worries people most is North Korea," Schrader said. "I think most people think we can go in and take care of Saddam Hussein pretty quickly."

The situation in Venezuela is particularly troubling because labor strikes by opposition groups have choked oil shipments from the world's No. 5 oil exporter, driving up the price of crude.

NYMEX crude oil futures ended 4 percent higher Friday at $33.08 a barrel, the highest in more than two years.

"If oil prices remain high, there is clearly a threat to economic recovery in the United States," said Alan Ackerman, senior vice president and strategist at Fahnestock & Co.

Ackerman also said markets will be eagerly awaiting the details of the Bush economic plan and the strength of opposition to it.

Corporate quarterly earnings reports will begin to trickle in next week as well, including Dow component Alcoa Inc. AA.N . But investors will be especially sensitive to any profit warnings and outlooks for the year.

On Thursday, retailers will report their sales at stores open at least a year for a December holiday shopping season that is seen to have the lowest gains in decades.

But, after warnings by Wal-Mart Stores Inc. WMT.N and Home Depot Inc. HD.N , investors believe that much of the bad news is already reflected in the market.

"It was a so-so Christmas. Everybody knows it and all negative news is probably placed in," Francis said