Oil eases as Venezuela exports rise

www.news24.com 03/02/2003 09:09  - (SA)   Tanya Pang

Singapore - Oil prices fell for the third day in a row on Monday as Venezuela continued to bump up vital petroleum exports, while key Opec ministers warned of a possible glut in supplies in the second quarter when winter demand ebbs.

But the threat of war in Iraq, the world's eighth-biggest oil exporter, continued to keep crude well above US$30 a barrel and within $2 of a 26-month high over $35 touched in January.

US light crude slipped US30c to $33.21 a barrel, 0.9% down from Friday's settlement in New York, when it lost 34c.

Venezuelan President Hugo Chavez said on Sunday that crude production had increased to nearly 1.8 million barrels per day, up from a low of 150 000 bpd after the strike began in December and more than half of the 3.1 million bpd pumped in November.

Oil strikers say current output stands at just over one million bpd, although they acknowledge it is rising.

Data from shipping agents showed Venezuela's oil exports higher at 890 000 bpd in the week to February 1, up from 550 000 bpd a week earlier but only one-third of normal levels of 2.7 million bpd before the strike.

Opposition leaders, who want Chavez to resign, scaled back the nine-week action on Sunday in the non-oil sector only. The strike continues in the oil sector.

A return of oil sales from Venezuela, the world's fifth-biggest oil exporter, could put some pressure on the Opec producers' group to rein in output.

The Organisation of the Petroleum Exprting Countires agreed in January to raise official production limits by 1.5 million bpd on February 1 to offset the Venezuelan outage.

Opec ministers warned at the weekend that oil markets could tip into oversupply in the second quarter with warmer weather in the Northern Hemeisphere and spark a price collapse.

Opec is due to meet again in Vienna on March 11.

Iraq still wildcard

Even if Venezuelan oil exports return to normal levels soon, analysts see little chance of a big fall in oil prices until uncertainty over war in Iraq is cleared up.

Commonwealth Bank's Thurtell said US crude may head down to $30 or $31 a barrel once the strike in Venezuela was resolved.

Iraq sells roughly two million bpd of crude to the world market and traders fear supplies may be shut off if there were a military strike against Baghdad, which has threatened to retaliate against neighbouring oil exporter Kuwait where hundreds of US troops are based.

US Secretary of State Colin Powell is due to present to the UN security Council on Wednesday evidence that Iraq has been operating programmes to build banned weapons.

Top UN disarmament officials Hans Blix and Mohamed ElBaradei are expected to return to Baghdad at the end of the week as part of last-ditch efforts to secure Iraqi compliance with UN resolutions.

US President George W Bush has vowed to disarm Iraq of weapons of mass destruction it claims Baghdad has stocked, with or without backing from the international community.