Canadian Press Monday, December 30, 2002

CARACAS (AP) - World oil markets will suffer for some time from the effects of the general strike aimed at toppling President Hugo Chavez, Venezuela's top oil official said Monday.

The four-week-old strike has shut down key sectors of the economy and created gasoline and food shortages throughout Venezuela, the world's No. 5 exporter. Oil production has plunged from three million barrels a day to 260,000 barrels a day. "For some time, we will have distortions on the world oil markets due to this situation," Oil Minister Rafael Ramirez acknowledged Monday.

The strike escalated Monday as police used tear gas to separate opponents and supporters of Chavez outside the state oil monopoly's headquarters in Maracaibo, the hub of the country's oil-producing west.

Strike leader Carlos Ortega, who leads Venezuela's largest labour federation, called on all citizens Monday to stop paying taxes.

And secret police arrested National Guard Gen. Carlos Alfonso Martinez, one of dozens who have occupied a Caracas city square for three months in rebellion against Chavez. A handful of people protesting the arrest outside secret police headquarters fled under a hail of rocks thrown by Chavez supporters and tear gas fired by police.

The combined influence of Venezuela's crisis and the threat of U.S. war in Iraq sent crude futures to a high of $31.02 a barrel Monday on London's International Petroleum Exchange, and a two-year high of $33.65 a barrel on the New York Mercantile Exchange.

U.S. markets were bracing for higher heating oil prices heading into winter, higher gas prices, and higher prices for all sorts of oil-based products. But reports that the Organization of Petroleum Exporting Countries was considering increasing output by at least 500,000 barrels a day took some heat out of the price.

OPEC's basket of seven crude oils hit a two-year high of $31.06 a barrel Friday, OPEC officials said Monday. Venezuela is an OPEC member.

Venezuela's opposition called the strike to force Hugo Chavez to call a Feb. 2 non-binding referendum on his presidency, which runs to 2007. Strike leaders hope a poor showing will increase pressure on Chavez to resign. At least 35,000 of the 45,000 employees joined the walkout at Petroleos de Venezuela SA, the state-owned oil monopoly.

Opponents blame Chavez for economic contraction of seven per cent in 2002, annual inflation surpassing 30 per cent, 17 per cent unemployment and chronic political unrest. They charge Chavez is trying to impose a leftist authoritarian government.

Chavez counters that his adversaries are trying to mount an "economic coup" and that Venezuela's constitution allows a binding referendum on his presidency next August.

Venezuela's government and opposition have traded charges over the actual state of the country's crucial oil industry, which represents 30 per cent of Venezuela's $100-billion US gross domestic product.

Ramirez claimed Monday that oil production was up to between 600,000 and 700,000 barrels a day and would reach 1.2 million barrels a day next week.

PDVSA executives say it's impossible for the government to increase production so quickly, even with replacements of field crews, executives, tanker crews and dockhands.

Ramirez also said that Venezuela's largest refinery, the Paraguana complex, should be running at full capacity of 930,000 barrels per day within two months.

Last week, Ramirez said a Venezuela-run refinery in Curacao would be up and running within weeks. But union and management at the refinery, which processes Venezuelan crude and ships gasoline back to Venezuela, say the mammoth facility shut down completely on Friday.

Chavez says his government is importing gasoline from Brazil and Trinidad, although the cargoes amount to little more than a few day's normal demand. Ramirez said the government may import gasoline through January.

The strike has cost $2 billion in lost oil revenue and damage to oil installations, Ramirez said.

The government also is importing food. Colombia sent trucks carrying more than 500 tonnes of cooking flour. The Dominican Republic sent rice.

Despite Chavez's efforts to break the strike, motorists lined up by the hundreds at the few service stations that had gas. Supermarkets were slowly running out of products like milk and bottled drinking water.

The Organization of American States has been mediating talks to find an electoral solution to the crisis. The next round of talks is set for Thursday.

Phil Gunson Caracas 31 Dec 2002, 01:26 UTC

Listen to Phil Gunson's report from Caracas

Venezuelan Energy Minister Rafael Ramirez said Monday the government was winning the battle against a four-week-old general strike that virtually shut down the state-owned oil industry. Meanwhile, street clashes between government and opposition supporters in two cities underlined the risk of serious violence.

Minister Rafael Ramirez, who was speaking at a breakfast with foreign correspondents, was upbeat about the prospects for the country's vital oil industry, despite what he admitted was serious damage done by the strike. The world's fifth biggest exporter of oil has seen its exports slashed in December to a 10th of their normal levels, and motorists are still having to wait in line for hours to fill their tanks.

The minister said he expected domestic gasoline supplies would be back to normal once the El Palito refinery, on the Caribbean coast, comes back on line in about 10 days. By next week, he said, crude oil production would be around 1.2 million barrels a day, or approximately 40 percent of normal. But exports would remain below par for some time yet.

Cars line up for gas in CaracasOpposition sources, however, and some independent experts, suggested the minister's version was overly optimistic. Dissident oil company managers continue to insist that the vast majority of workers in the state oil corporation, Petroleos de Venezuela, remain on strike, and that it will be impossible to restart refineries and normalize production without them.

Although there has been less violence on the streets than expected during the strike, tensions remain high as the opposition continues to push for the resignation of leftist President Hugo Chavez. In the western port city of Maracaibo, police had to disperse rival groups of demonstrators with teargas, and similar clashes took place in the capital, Caracas, after a dissident military officer was arrested by the state security police, known as the Disip.

General Carlos Alfonzo is one of a large group of officers who have been occupying a Caracas square since October in a peaceful protest against the government. His whereabouts, and the charges against him, were not immediately revealed, though he was reportedly being held at military intelligence headquarters.

Meanwhile, in Washington, a state department spokesman reiterated U.S. concern over possible outbreaks of violence and urged the two sides to reach a peaceful, electoral solution to the

By ALEXANDRA OLSON

Police fired tear gas to separate supporters and opponents of President Hugo Chavez in a western city Monday, as leaders of an anti-Chavez strike called for protests in the president's strongholds in the capital.

Chavez opponents broke past police lines and tried to tear down a tent set up by supporters of the president Maracaibo. Police firing tear gas shoved the two sides apart.

The four-week strike has depleted gasoline supplies in the world's No. 5 oil exporter but failed to force the president from office.

"The strike will continue until the last consequences," said Carlos Ortega, president of Venezuela's largest labor confederation. "This regime is only prolonging its agony. Venezuelans, your indignation is just. The people never give up."

Ortega's comments Sunday came after hundreds of thousands of Chavez opponents marched through the street of Caracas _ the latest in countless of protests that have accompanied the strike since it began Dec. 2.

Opposition leaders are threatening more civil disobedience, including urging citizens not to pay income taxes.

Venezuela's strike and the crisis in Iraq sent European benchmark Brent crude oil futures soaring to a 15-month high of $30.70 a barrel Monday.

The opposition called rallies in two of poorest neighborhoods in the capital on Monday, trying to chip away at Chavez's support in the slums, where many still consider him the first leader in generations to stand up for their interests.

Chavez's popularity has slipped to about 30 percent, as discontent grows over a wrenching economic recession and political turmoil. The former army paratrooper, however, still counts on almost 45 percent support in the poor regions.

On Sunday, Chavez again vowed he wouldn't quit. He insisted he was foiling a strike that has slashed oil exports from 3 million barrels a day to 160,000 and forced Venezuela to look abroad for food and fuel.

"I think I'm never going to leave. I feel so loved that I am never going to leave," Chavez said during his weekly television show. "It's a treacherous oligarchy that wants to break the government and break the Venezuelan people."

Chavez hosted the show outside the Yagua gasoline distribution center in the western state of Carabobo, and applauded every time a gasoline truck left the installation. Two hundreds trucks left, said Chavez, who replaced striking managers at Yagua.

Gasoline shipments were coming from Venezuela's La Isla refinery in Curacao and Trinidad, Chavez added. One oil tanker has already arrived from Brazil.

Mile-long lines persisted at service stations. Many Venezuelans were doing without products like fresh milk, soft drinks, beer and tissue paper.

Ali Rodriguez, president of PDVSA, said Venezuela is currently producing between 600,000 and 700,000 barrels a day. Striking PDVSA executives saying it is producing less than 200,000 barrels a day. Production is normally about 3 million barrels a day.

Venezuela's largest labor confederation and business chamber called to demand Chavez accept a nonbinding referendum on his rule. Many in the opposition now demand early elections _ which constitutionally can only take place if Chavez resigns.

They accuse the president of running roughshod over democratic institutions and wrecking the economy with leftist policies. Chavez says opponents should wait for a possible recall referendum midway through his term, or August 2003, as permitted by the constitution. He was elected in 1998 and re-elected in 2000, and his term ends in 2007.

Negotiations sponsored by the Organization of American States, which have produced few results, were to resume Jan. 2 after a brief break for the holidays.

By Beth Heinsohn in New York 31dec02

CRUDE oil prices surged today, setting new two-year highs in New York as momentum built behind a rally ignited by global oil supply worries with expectations of higher prices for Australian businesses and motoirsts. The five-week old nationwide strike in Venezuela and US-Iraq tensions continue to fuel worries about oil supply.

The strike in Venezuela, source of 15 per cent of United States oil imports in October, shows little sign of easing, as neither President Hugo Chavez's Government nor the opposition are backing down.

A loss of oil supply from both Iraq and Venezuela would be more than the Organisation of Petroleum Exporting Countries could make up, analysts say.

"The Venezuela strike is not ending, and the flow of US troops and supplies to the Persian Gulf is increasing," said BNP Paribas analyst Tom Bentz. "There's no sign of any reprieve."

The chief executive of the Australian Service Station Association, Ron Bowden, said motorists could be paying up to $1.05 per litre for petrol next month because of the strike in Venezuela and fears of war in Iraq.

Mr Bowden said the situation would also shift the mid-point in the cycle of price rises and falls from 92 cents a litre to the "high nineties".

"The supply and demand balance has taken a hit on the supply side," Mr Bowden said.

"We are on the other side of the world but we're not immune. We are going through this oil company-imposed price cycle - that goes through a 10 to 12 cent movement."

February crude oil futures on the New York Mercantile Exchange shot up by US93 cents to hit a high of $US33.65 a barrel. February Brent-blend crude oil futures on the International Petroleum Exchange in London were up as much as 86 US cents at a high of $US31.02.

Prices in New York are closing in on highs not seen since December 2000. The high set on December 1, 2000, was $US34.15 a barrel. The front-month contract closed at $US33.80 on November 30, 2000.

Prices were spurred upward at that time by a period of high tension in the Middle East. Ultimately, former US president Bill Clinton was moved to release oil from the Strategic Petroleum Reserve, ostensibly to head off a shortage of heating oil that winter.

The administration of President George W. Bush has thus far shunned that option, saying a severe supply emergency doesn't yet exist. The administration, however, has allowed oil companies to delay required deliveries of crude to the reserve.

The strike in Venezuela has paralysed crude oil production and refinery output of products such as petrol and heating oil, cutting exports of both oil and refined products to almost nothing. Venezuela has taken the unusual step of importing petrol from Chile, Trinidad and Brazil for domestic use. State-owned oil monopoly Petroleos de Venezuela SA lost more than $US1.3 billion ($2.32 billion) in December due to the strike.

Chavez was adamant in his resolve during his weekly television show Hello Mr. President.

"I will not retire, I will go on the attack, the offensive," Chavez said yesterday.

He said he is winning the oil war and used the takeover of the Yagua distribution plant in Carbobo State as an example of his offensive to break the strike. The opposition says those efforts aren't bearing much fruit.

The continuing confrontation is fuelling the rise in oil prices.

"After crude's strong finish on Friday, all the funds needed to see was (Venezuelan President Hugo) Chavez going toe to toe with the opposition over the weekend and they came out buying with both hands," said Ed Silliere, a trader with Energy Merchant Corp in New York.

Analysts and traders remain sceptical about a fast return to normal crude oil supply from Venezuela even if the strike were to break.

Reports from PdVSA on Saturday that current crude oil production was higher at about 600,000 barrels a day compared to a week ago didn't do much to damp crude oil price's ascent last night and so far today.

Weekly inventory reports from the American Petroleum Institute and the Department of Energy's Energy Information Administration are expected to finally show sizable drawdowns as a result of the massive disruption to the production of crude oil and refined products in Venezuela.

Even reports that OPEC might boost output to cool prices didn't do much to slow the rally, with oil futures in New York and London falling about US30 cents from their highs but remaining well up on the day.

"The OPEC news put a softer tone on things, but market sentiment still sees further upside," a broker in London said.

AP,AAP

By THE ASSOCIATED PRESS

PORT-OF-SPAIN, Trinidad - Trinidad's state-owned oil company will ship some 300,000 barrels of gasoline on New Year's Day to Venezuela, officials said Monday.

The arrangement is part of a commercial arrangement between both countries to trade crude oil for refined products, said Oliver Flaks, spokesman for Trinidad's state-owned oil company Petrotrin. The shipment is not related to an ongoing general strike in Venezuela, Flaks said.

The 4-week-old strike aimed at toppling President Hugo Chavez has shut down key sectors of the economy and created gasoline and food shortages throughout Venezuela, the world's No. 5 exporter. Oil production has plunged from 3 million barrels a day to 260,000 barrels a day.

The gasoline will be a payment for 500,000 barrels of crude oil worth $15 million, which Petroleos de Venezuela, S.A. already delivered to Trinidad, he said.

At current market prices, the $15 million will amount to 300,000 barrels, but the precise amount to be shipped will depend on the price of gasoline on Jan. 1, Flaks said.

Petrotrin "will continue to ensure that the supply of refined products to its trading partners is maintained," the company said.

Flaks said he did not know the name of the ship that will transport the gas or where it will dock.

The Venezuelan oil company will supply the ship and make the landing, so Petrotrin is not involved in the shipping of the gasoline, he said.