June 9, 2003, 2:14PM Reuters News Service

DOHA, Qatar - OPEC gathered in Qatar today amid signs high oil prices and low stock levels in the West will stay the cartel's hand on cutting output.

Global markets have been starved of two months of supply from Iraq, the world's seventh largest exporter before the war, despite extra volumes from Saudi Arabia and other cartel members.

With U.S. crude at nearly $32 a barrel, Indonesia and Venezuela have said there is no need for any cut at Wednesday's meeting from OPEC's 25.4 million barrel a day ceiling, in effect since the start of June.

However, the market outlook is far from clear and OPEC President Abdullah al-Attiyah said he was concerned by a possible surplus of oil in the next three months.

"All the analysts are talking about facing a 1.4 million bpd glut by the third quarter," Attiyah said. "So far I have to share that opinion."

Officials, for now, are not completely ruling out a cut to keep the heat under a market that is pricing OPEC's index of crudes near the top end of the group's $22-$28 target.

"We are going to see what measures should be taken: if we should keep things as they are, if we should make an adjustment, a cut. I can't yet say which," OPEC Secretary-General Alvaro Silva told Reuters.

UAE Oil Minister Obaid bin Saif al-Nasseri said he did not rule out a cut, but he thought the cartel should address a mismatch between quotas and real output levels first.

OPEC output, excluding Iraq, totalled 26.6 million bpd in May, 1.2 million more than limits set for June, according to a Reuters survey. But it is expected to fall this month as Saudi Arabia cuts back on loadings.

RIVAL EXPORTERS

The Middle East-dominated cartel, which controls half of world exports, will most likely use the Doha meeting to prepare the ground for a possible cut later this year when Iraqi output is expected to rise.

"With prices where they are I don't think OPEC will do anything," said Nauman Barakat, a broker at Fimat International Banque. "They will probably call another meeting once Iraq comes back and rope in non-OPEC to do its bit."

OPEC has invited rival exporters including Mexico and Russia to Qatar, hoping to maintain a fragile partnership that has kept OPEC's basket near $25 per barrel on average for four years -- a boom price compared to the previous decade.

Consuming countries have urged the cartel to keep supplies up, fearing a damaging spike in gasoline prices this summer when demand from motorists peaks.

Recovering from the war, Baghdad is preparing to resume international sales in about a week. Exports are expected to hit a million barrels per day next month, about half pre-war levels.

In April, OPEC ministers said they were ready to cut sharply to make room for Baghdad, possibly as soon as the Doha meeting.

Now data from the OPEC secretariat shows that the world market can absorb some 1.3 million bpd above forecast demand during the third quarter to replenish stocks, an OPEC source said, asking not to be named.

"That means there is more than enough room for Iraq at current quota levels," he told Reuters, based on an assumption that Iraq will supply at 1.5 million bpd in the third quarter.

June 9, 2003, 4:14PM Reuters News Service

NEW YORK - Oil prices hit fresh 12-week highs today as members of the Organization of the Petroleum Exporting Countries cartel gathered for a Wednesday meeting against a backdrop of tight global supply.

U.S. crude oil in New rose 31 cents to $31.59 a barrel, hitting the highest price in 11 weeks after rising 20 percent in barely a month. Brent crude in London rose 7 cents to $27.85 a barrel.

OPEC ministers meeting in the small Middle East emirate of Qatar will debate whether they need to cut production to accommodate the expected resumption of Iraq's oil exports this month.

With prices nearly 30 percent higher than the same time last year and Iraq's exports expected to stay below pre-war limits for up to a year, some OPEC ministers have said there seems to be no need for the group to rein in supply.

OPEC, which controls around half the world's crude exports, aims to keep prices in a $22-28 a barrel range for its basket of crude oils. The basket was last valued at $26.77.

"There is no urgent need for the organization to modify its output," said Frederic Lasserre of SG Securities in a report.

"Iraq is still not in a position to harm the balance of supply and demand. Inventories are rising in line with the season but in absolute terms remain very low," Lasserre added.

After falling heavily from 12-year highs near $40 when Middle East oil facilities escaped feared damage from the U.S.-led invasion of Iraq, oil prices have now risen back to the levels that can further undermine already weak economic growth.

OPEC will use this week's meeting to press independent exporters such as Russia, Norway and Mexico to back any supply cuts needed later this year, OPEC President Abdullah al-Attiyah of Qatar said.

Iraq will this month sell its first crude since the U.S.-led invasion in mid-March, tendering 10 million barrels of stored crude oil this month, allowing it to deliver an average of about 750,000 bpd during the second half of June.

Sabotage at oil facilities since the war will keep exports down to one million bpd in July, Iraq's de facto oil minister Thamir Ghadhban said on Monday. Before the war, Iraq was producing about 2.5 million bpd and exporting two million bpd.

U.S. fuel inventories have failed to rebuild after supply disruptions from a strike in Venezuela and ethnic strife in Nigeria drew down supplies earlier this year.

U.S. crude stocks remain in an 11 percent deficit versus last year, while gasoline is down five percent. The next U.S. government supply data will be released on Wednesday.

U.S. average retail gasoline prices fell over the last three weeks, but did so at a slower rate than previously reported as crude oil prices began to rise, according to the Lundberg survey of about 8,000 gas stations.

"In the past three weeks, gasoline price declines are much slower and appear to be ceasing altogether," said Trilby Lundberg, editor of the survey.

The national average for self-serve regular unleaded gasoline fell 1.8 cents to $1.51 a gallon -- more than 10 cents above last year in the period between May 16 and June 6.

Reuters, 06.09.03, 1:41 PM ET CARACAS, Venezuela, June 9 (Reuters) - Venezuela, responding to Iranian interest in buying its bauxite, has proposed setting up a joint-venture alumina plant on Venezuela's Orinoco river, state industrial holding company CVG said on Monday. A spokeswoman for the company, Corporacion Venezolana de Guayana, told Reuters its President, Francisco Rangel, outlined the proposal to Iran's government and aluminum industry during a visit to the Gulf state at the end of May. "The Iranians want to buy bauxite, but (Rangel) explained to them that CVG doesn't want to just sell bauxite," the spokeswoman said. CVG operates Venezuela's state-run aluminum industry located in mineral-rich southeastern Bolivar state. The spokeswoman said Rangel had made clear CVG was only interested in selling bauxite through a strategic alliance with Iran, involving setting up a joint venture in Venezuela to produce alumina which could be shipped to Iran for smelting. "The idea is that the Iranians make the investment in the plant, and then they would be paid back through production," the spokeswoman said. CVG had identified a possible site for the proposed plant at Caicara on the Orinoco river, which would make it easier to transport bauxite from Venezuela's huge Pijiguaos mines. It was not immediately clear what response Rangel had obtained in Iran to his proposal. Iranian embassy officials in Caracas were not immediately available for comment. According to CVG, Iran has plans to increase its installed primary aluminum production capacity to more than one million tonnes in the next 10 years from the current 140,000 tonnes. It is looking for fresh sources of raw material to do this. Venezuela's fiercely nationalist left-wing president, Hugo Chavez, has made clear his government does not simply want to export raw materials. He says he prefers forming alliances with major foreign producers to develop value-added processing, smelting and manufacturing ventures inside Venezuela. As examples of this kind of preferred association, the CVG spokeswoman mentioned existing contracts with Swiss-based Glencore International AG and France's Pechiney <PECH.PA>. Glencore is leading a consortium in a $650 million project to build a fifth production line at CVG's Alcasa smelter. Pechiney is proceeding with a $210 million project to expand production at an alumina plant operated by CVG-Bauxilum to 2.2 million tonnes a year from 1.6 million tonnes. CVG is seeking foreign partners to participate in an ambitious expansion plan that foresees increasing its primary aluminum output capacity by more than 400,000 tonnes to more than one million tonnes at the end of the decade. Since Chavez, a populist former paratrooper, was elected in late 1998, the world's No. 5 oil exporter Venezuela has moved to strengthen ties with states seen as hostile by the United States, such as Iran, Libya, Cuba and previously Iraq, when it was ruled by the now toppled Saddam Hussein. This has irritated Washington, although the United States remains the single biggest buyer of Venezuelan oil.

FoxNews Monday, June 09, 2003

NEW YORK  — Oil prices hit fresh 12-week highs Monday as members of the Organization of the Petroleum Exporting Countries (search) cartel gathered for a Wednesday meeting against a backdrop of tight global supply.

U.S. crude oil in New York rose 31 cents to $31.59 a barrel, hitting the highest price in 11 weeks after rising 20 percent in barely a month. Brent crude (search) in London rose 7 cents to $27.85 a barrel.

OPEC ministers meeting in the small Middle East emirate of Qatar (search) will debate whether they need to cut production to accommodate the expected resumption of Iraq's oil exports this month.

With prices nearly 30 percent higher than the same time last year and Iraq's exports expected to stay below pre-war limits for up to a year, some OPEC ministers have said there seems to be no need for the group to rein in supply.

OPEC, which controls around half the world's crude exports, aims to keep prices in a $22-28 a barrel range for its basket of crude oils. The basket was last valued at $26.77.

"There is no urgent need for the organization to modify its output," said Frederic Lasserre of SG Securities in a report.

"Iraq is still not in a position to harm the balance of supply and demand. Inventories are rising in line with the season but in absolute terms remain very low," Lasserre added.

After falling heavily from 12-year highs near $40 when Middle East oil facilities escaped feared damage from the U.S.-led invasion of Iraq, oil prices have now risen back to the levels that can further undermine already weak economic growth.

OPEC will use this week's meeting to press independent exporters such as Russia, Norway and Mexico to back any supply cuts needed later this year, OPEC President Abdullah al-Attiyah of Qatar said.

Iraq will this month sell its first crude since the U.S.-led invasion in mid-March, tendering 10 million barrels of stored crude oil this month, allowing it to deliver an average of about 750,000 bpd during the second half of June.

Sabotage at oil facilities since the war will keep exports down to one million bpd in July, Iraq's de facto oil minister Thamir Ghadhban said on Monday. Before the war, Iraq was producing about 2.5 million bpd and exporting two million bpd.

U.S. fuel inventories have failed to rebuild after supply disruptions from a strike in Venezuela and ethnic strife in Nigeria drew down supplies earlier this year.

U.S. crude stocks remain in an 11 percent deficit versus last year, while gasoline is down five percent. The next U.S. government supply data will be released on Wednesday.

U.S. average retail gasoline prices fell over the last three weeks, but did so at a slower rate than previously reported as crude oil prices began to rise, according to the Lundberg survey of about 8,000 gas stations.

"In the past three weeks, gasoline price declines are much slower and appear to be ceasing altogether," said Trilby Lundberg (search), editor of the survey.

The national average for self-serve regular unleaded gasoline fell 1.8 cents to $1.51 a gallon -- more than 10 cents above last year in the period between May 16 and June 6.

<a href=www.vheadline.com>Venezuela's Electronic news Posted: Monday, June 09, 2003 By: Jose Gregorio Pineda

VenAmCham's (chief economist) Jose Gregorio Pineda writes: The current exchange control system has provoked excess liquidity in the market, providing a large source of credit for the government. The economic agents' inability to legally acquire external assets leaves the system flush with idle funds, and given the deep contraction of the economy and the enormous operating difficulties with which Venezuelan companies are struggling, the only use the financial system can make of those funds is to buy public securities.

Given the serious Treasury problems, the government plans to issue 4.88 trillion bolivares of internal bonds or the equivalent in dollar, yen, or euro-denominated securities. 3.85 trillion bolivares of that amount will be used to cover internal and external debt service, and 1.02 trillion bolivares for spending this year.

• This month the government will have to make large scale public debt service payments, both externally (US$909 million) and internally (Bs.760 billion).

It is important to note the terms on which the external bonds sales are being made; the dollar-denominated bonds may pay extremely high yields, of as much as 17.65%. There is no question that, in the fact of this extremely high cost of overseas bond issues, the domestic market will continue to be the chief option at the government's disposal.

The availability of funds for public financing, generated by the exchange controls, has allowed the Finance Ministry to carry out its internal debt market restructuring through "voluntary" swaps. Naturally, in the absence of exchange controls, and consequently, the "forced" excess of liquidity, many of the scheduled internal debt swaps would become much less "voluntary" than they now seem.