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.

BRASILIA - Government price controls may be reimposed on gasoline and electricity, Brazil's incoming energy minister says.   Dilma Roussef, President-elect Luiz Inacio Lula da Silva's nominee to be mines and energy minister, did not detail how a new pricing policy could look like. But he said the controls were under  consideration.

"To define pricing policies, to define Brazil's petroleum and electric energy policy ... that is the role of the ministry, it's the role of the state," Roussef told television reporters.

Before 2002, the government fixed gasoline and cooking gas prices every couple of months through a complicated pricing system that ran large deficits. The government used the controls to put off necessary fuel price increases and avoid rising inflation.

Brazil's oil and gas sector was opened to full competition in January when previous price regulation was abolished. However, deregulation was criticised after several fuel price increases by state oil firm Petrobras have accelerated the country’s inflation rate.

Electricity price increases so far are granted to energy companies by Brazil's energy regulator without the approval by the ministry of mines and energy, a method Roussef criticized as well.

On Sunday, Petrobras raised the cost of gasoline at the pumps nearly 10% and the price of cooking gas for consumers nearly  5%.

Sapa-AP

Tuesday December 31, 9:02 AM A Wall Street Journal Online News Roundup

Americas markets ended higher, led by Argentina on confidence it would seal a debt rollover accord with the International Monetary Fund. Argentina faces a Jan. 15 deadline to make a $1 billion payment to the Washington-based agency.

Production Minister Anibal Fernandez told local radio stations that pressure from the Group of Seven leading industrial nations was prodding the IMF toward an accord.

ADVERTISEMENT "I don't have doubts that things are in place to sign a short-term accord, thanks to the pressure of the G-7," he said. The G-7 is an organization of some of the world's most economically powerful nations, made up of the U.S., the U.K., Canada, Germany, France, Italy and Japan.

Rafael Ber, senior analyst at Argentine Research, said the positive IMF news meant stocks should end the year Tuesday on a happy note. "The climate among investors is positive right now," he added. "...The market's ending the year with a bit of hope."

The key Merval index rose 1.4% to 525.09, as Telecom Argentina climbed 3% to 1.69 pesos and electricity firm Central Puerto rose 5.3% to 79 centavos.

In Brazil, shares ended the last session of 2002 with a small gain in thin pre-holiday trade ahead of a change in government on Jan. 1. The key Bovespa index ended 0.3% higher at 11,268.

Investors will keep close tabs on President-elect Luiz Inacio Lula da Silva during his first weeks in office, looking for hints about his team's economic policies. A key concern at this critical moment of transition is Brazil's rising inflation.

In Canada, the key Standard & Poor's/TSX Composite Index rose 21.72 points, or 0.3%, to 6617.55. Markets were pushed higher by a positive U.S. market, as the Dow Jones Industrial Average rose 29.07 points, or 0.4%, to 8332.85.

Energy stocks led the pack in Toronto, as concern about a possible U.S. war on Iraq and the general strike in Venezuela continued to weigh on investors. EnCana rose 55 Canadian cents to C$48.66, while Canadian Natural Resources climbed 75 cents to C$47.20.

Mexican shares ended slightly lower.

Copyright (c) 2002 Dow Jones & Company, Inc. All Rights Reserved.

December 30, 2002, 17:15

President Thabo Mbeki and Foreign Minister Nkosazana Dlamini-Zuma, will attend the inauguration on Wednesday of Luiz Inacio "Lula" da Silva as Brazil's new president. Da Silva, a former metalworker and trade unionist, was elected president on October 27.

"The participation of President Mbeki and his delegation in the inaugural ceremonies of the new Brazilian president is expected to further cement the already excellent relations between South Africa and Brazil," says the department of foreign affairs.

Formal diplomatic relations between the two countries date back to 1948. Brazil was, in later years, at the forefront of calls for the isolation of the apartheid government, said a foreign affairs statement. "Since the transition to a democratic South Africa, bilateral relations between South Africa and Brazil have normalised rapidly, and evolved to a level that could be described as strategic."

The first meeting of a joint commission created to boost bilateral co-operation took place in Brasilia in August. South Africa considers Brazil as a strategic country being the largest economy in South America and playing a prominent role in world diplomacy, the department said. Among other things, Brazil has been a driving force in the promotion of South Africa's relations with countries that make up the South American trade bloc, Mercosur.

Brazil - SA's biggest Latin America trading partner "In view of Brazil's historical link to Africa and its large population of African descent, Brazil is potentially a significant partner in achieving the objectives of Nepad (the New Partnership for Africa's Development)." The department said Brazil was South Africa's biggest trading partner in Latin America. South African exports to that country reached their peak in 1996 with a total of $414 million.

More than a quarter of this figure was represented by industrial alcohol, which Brazil used in its fuel pool. South African exports to Brazil for the following four years were $367 million, $278 million, $172 million and $228 million respectively.

Major South African exports to Brazil included precious and semi-precious stones, metal, anthracite and coal, iron and steel, chemical products, organic chemicals, aluminium, nickel, synthetic fibres, machinery and mechanical appliances, paper and paperboard. Imports from Brazil increased by almost 85% between 1993 and 1997. In 2000, exports to South Africa stood at $302 million a trade surplus of $74 million in Brazil's favour. South Africa imported from that country mostly vehicles and vehicle components, aircraft, machinery, mineral fuels, electrical machinery, animal and vegetable fats and oils, meat, ores, organic chemicals and tobacco. - Sapa