www.financialexpress.com

New York, March 14:  World oil prices slumped on Thursday as the twisted road to war in Iraq appeared to lengthen, warm weather approached and Venezuela pumped more crude, traders said.

US President George Bush had run into a diplomatic tangle in the UN Security Council, traders said.

“The troubles the Bush administration is having at the UN appear myriad, giving the market the impression that the imminency of a war has been pushed out a bit,” Fimat USA analyst John Kilduff said.

New York’s reference light sweet crude contract for April delivery skidded $1.82 to $36.01 a barrel.

In London, the price of Brent North Sea crude oil for April delivery slid $1.44 to $32.47 a barrel.

The US, looking for a way around French, Russian or Chinese vetoes, said it could allow a UN security council vote on war against Iraq to slip into next week or even forego the vote altogether.

Michael McAllister, energy analyst at Fahnestock and Co, said news that Venezuela had recovered from strike action to push production up to 2.95bpd depressed prices. “It is a jittery market that can be swayed by one story,” he said.

Prices have already spiked up to within a whisker of $40 a barrel in New York recently, the highest level since the run-up to the last Gulf war, though they have since eased back to around $37-38.

But experts say such a swift drop in prices as seen in 1991 is less likely this time.

Lawrence Eagles, analyst at Brokers GNI-Man Financial, said on that occasion the oil market had been expecting a short war.

www.timesdaily.com The Associated Press March 14. 2003 1:43PM

OPEC members agreed Tuesday to stick with their current quotas for crude oil production but pledged to boost output in the future to keep supplies flowing in case of any serious disruption. Venezuela plans to produce above its OPEC crude oil output quota to make up for lost revenue during a two-month strike, the oil minister said Friday. Rafael Ramirez wouldn't say how much Venezuela would pump above its 2.8 million barrels a day quota. Output is 2.9 million barrels a day now, the government says. "We have to do it gradually so as not to affect the oil market too much," Ramirez told state television station Venezolana de Television. "It will reach a level that will compensate what we stopped selling in the market." Ramirez said Venezuela had an agreement with the Organization of Petroleum Exporting Countries allowing it to overproduce. Venezuela is recovering from a political strike that petered out last month. Oil production reached a low of 200,000 barrels a day at the height of the walkout, which cost Venezuela $6 billion. It also forced Venezuela to spend $540 million on gasoline imports to make up for severe shortages. Executives fired from the state oil monopoly for participating in the strike say production is only 2.1 billion barrels a day. The government fired almost half the 35,000-strong work force at Petroleos de Venezuela SA for walking out. On Thursday, Venezuela brought its largest catalytic cracker back online, bringing the country a step closer to resuming gasoline exports to the United States. Venezuela was the world's fifth-largest exporter before the strike. Venezuela crude and refined products accounted for 14 percent of U.S. oil imports last year. Venezuela also announced Thursday that it had stopped importing gasoline. Ramirez also said there was an $8 to $10 premium on international oil prices because of U.S. threats to lead an attack on Iraq. He said there was enough world production to meet demand. OPEC agreed Tuesday to stick with its production target of 24.5 million barrels a day.

english.peopledaily.com.cn Last updated at: (Beijing Time) Thursday, March 13, 2003

Along with more than 200,000 American soldiers gathering at the Gulf Area the US war against Iraq is now at a point of touch-and-go. At present, the worries induced by the US-Iraqi War has already effected a great impact on the world oil market, making the world economy in the course of recovery to confront a new pressure. Along with more than 200,000 American soldiers gathering at the Gulf Area the US war against Iraq is now at a point of touch-and-go. At present, the worries induced by the US-Iraqi War has already effected a great impact on the world oil market, making the world economy in the course of recovery to confront a new pressure. However, some persons in the US hold that once the war is kicked off the world oil price will see a quick downturn and the pressure exerted on the world economy will be alleviated along with it. Whether the prediction is correct or not has incurred doubts among many people of the world. History has really witnessed a surprising similarity. At present when the US is about to launch war against Iraq it has made the oil price to approach the price level as happened in the Gulf Crisis some 12 years ago. Those, holding the view that once the war begins the oil price will soon go down, do not mean that they have a loose tongue. In 1990 when Iraq intruded into Kuwait, causing the eruption of the Gulf War the world oil price had once shot to over US$ 41 per barrel. But when the multinational troops headed by the US launched the "Sandstorm" attack the oil price immediately went down, and to somewhere near US$ 25 per barrel not long afterwards. The problem is that the situation has changed and things are no longer what they were in the past. Can the "old calendar" of some 12 years ago be adaptable to the situation at present. This is really a very big question mark. Doubt 1, if the old calendar will spell any good lies in whether the supply and demand of the oil can be balanced quickly in the world. The discontinuation of the oil export from Iraq and Kuwait brought about last time by the eruption of the Gulf Crisis and international embargo immediately led to the daily reduction of 4.5 million barrels in world crude oil supply. To fill the gap, Saudi Arabia, world No.1 oil producing country at once increased its oil output, which witnessed a daily additional output of 3 million barrels in a very short time, thus making up the two thirds of the output losses in Iraq and Kuwait. And accordingly other countries also made efforts to make ensure the crude oil supply. For the moment, the average daily consumption of oil is 78 million barrels, an increase of over 15 percent as against that of 67 million barrels in 1990. But judging from the situation of the OPEC there is not much strength left for further exploitation since most of these countries are actually engaged in overexploitation of the oil production. Whereas some 12 years ago the surplus productivity of the OPEC countries reached 7.5 percent of the global oil-needed amount, but now this has been reduced to around 2 percent. Except the Saudi Arabia, the other countries see not much productivity left for increasing oil production while the restoration of oil exportation from Venezuela, one of the major oil-exporting countries in the world still needs sometime to manoeuvre. Doubt 2, whether the old calendar will work lies in the low oil reserve leading to the fragility of the market resistance to the fluctuation of oil price. Though the US, starting from the yearend of 2001 increased its strategic oil reserve the world reserve of the commercial oil in general is on the decrease. We've witnessed that the US commercial oil reserve has recently gone down to its bottom-line never occurred in a few years time before. According to the statistics provided by the "Wall Street Journal" the commercial oil reserve of the industry-developed countries saw a supply of some 65 days in 1990 but now it is reduced to 52 days only. Besides, presently we have seen come forth some complicated factors basically rare to have seen some 12 years ago, included in which are the worries brought about by the terrorist attacks. For example, the finely equipped and well-trained US navy has every capability to cope with any form of military attack from any of the Gulf countries. It is yet a question mark whether it is able to effectively put to stop any terrorist activity by an ordinary way on the oil shipping-line. The US warship and the French oil tanker have in recent years been confronted with the terrorist destruction by small vessels in a suicidal way. This is a new problem the western countries are faced with after the "9.11 Incident". Whether the old calendar can spell any good for, or whether it can be fully applied to the new reality that we are facing today is a new ordeal brought about and put before the US military attack on Iraq by the world oil market. It is also a question of great importance that deserves close attention of the world. By People's Daily Online

www.nytimes.com By BLOOMBERG NEWS

Crude oil futures closed at a 12-year high yesterday, for the third time in the last two weeks, after the Energy Department reported an unexpected decline in inventories.

Supplies of crude oil last week fell 1.4 percent, to 269.8 million barrels, the department said. Inventories were 16 percent lower than they were a year earlier and close to a 28-year low. Analysts had expected an increase. The decline came as the United States appears headed for a war in Iraq, which pumps about 3 percent of the world's oil.

"This is a big problem," said John Kilduff, senior vice president for energy-risk management at Fimat USA in New York. "You don't want to have low oil inventories when the country is about to go to war."

Crude oil for April delivery rose $1.11, or 3 percent, to $37.83 a barrel on the New York Mercantile Exchange, registering the highest closing price since Oct. 16, 1990, when the Iraqi occupation of Kuwait cut off exports from both countries.

Prices reached $39.99 a barrel during trading on Feb. 27, the highest intraday price since October 1990, when futures rose to a record $41.15.

In London, the April Brent crude-oil futures contract rose 62 cents, or 1.9 percent, to $33.91 a barrel on the International Petroleum Exchange.

Crude oil imports fell 12 percent, to 7.62 million barrels a day in the week ended March 7, the weekly report on petroleum inventories, production and imports said.

"This is as bad as it gets," said Ed Silliere, vice president for risk management at Energy Merchant in New York, which markets gasoline and heating oil to local distributors. "Supplies are very tight."

Analysts had expected that increasing imports from Venezuela and Saudi Arabia would send inventories higher. A strike in Venezuela had been limiting shipments to the United States.

Venezuela pumped about 3 million barrels of oil a day before the strike began in December and now is pumping 2.7 million barrels a day, according to the Venezuelan government. Striking oil workers say production is closer to 1.9 million barrels a day.

www.theledger.com Published Wednesday, March 12, 2003 By BRUCE STANLEY AP Business Writer VIENNA, Austria A surge in world oil output last month has left producer countries with too little spare capacity to fully offset a wartime halt in supplies from Iraq, the International Energy Agency warned Wednesday. Output increased 2.5 percent worldwide in February and oil inventories tightened in major importing nations, the agency said. Fears of a U.S.-led attack on Iraq propelled prices to their highest levels since the 1991 Persian Gulf War. International oil markets are "running on empty" as war clouds gather again in the Gulf, the agency said in its monthly oil market report. "A further supply disruption would tax a system operating at close to capacity," the report said. The only reliable cushion for consumers may be the 4 billion barrels in strategic stocks of crude that IEA members have amassed for use in an emergency, it added. The agency issued its grim assessment a day after the Organization of Petroleum Exporting Countries decided to leave its oil production quotas unchanged at 24.5 million barrels a day. OPEC, which pumps about a third of the world's crude, made clear that it would boost its output to try to cover any shortfall arising from a war. The IEA is the energy watchdog of the Organization for Economic Cooperation and Development, a group of the world's wealthiest oil-importing countries. While highlighting many causes for concern in oil markets, the IEA expects that the end of winter - the peak season for heating oil sales - will reduce demand for crude by about 1.6 million barrels a day. Such a decrease would in itself offset a loss of Iraq's current exports under the U.N. oil-for-food program, the report said. The IEA acknowledged efforts by OPEC and independent producers to put additional crude on the market. World production rose in February by 1.96 million barrels a day to 79.41 million barrels, and OPEC contributed more than three-fourths of the increase, the agency said. OPEC member Venezuela boosted its daily production by 850,000 barrels as its oil industry continued to recover from a crippling strike. Saudi Arabia's output grew by 330,000 barrels a day, and of OPEC's 11 members, only Iraq and Indonesia failed to pump at higher levels last month, the report said. "If the IEA's numbers for OPEC production in February are correct, there's a lot of oil on the water that should be hitting inventories in a few weeks. That's the good news for consumers," said Adam Sieminski, an oil price strategist at Deutsche Bank in London. Sieminski agreed that OPEC's limited amount of spare capacity could be a problem if markets suffer a serious supply disruption. Most producers are pumping all they can, and only Saudi Arabia - with the world's biggest oil reserves - has significant room to pump more. OPEC claims to have 2 million to 4 million barrels in additional production capacity. The IEA argued that OPEC's "effective spare capacity" - the additional crude it could produce on short notice - was much smaller. The agency said OPEC's effective spare capacity fell last month to 1.72 million barrels a day from 2.37 million barrels in January, as the cartel produced more oil to make up for the outage from Venezuela. With OPEC increasing production to cash in on current high prices, this extra capacity has probably diminished in March to fewer than 1 million barrels a day, the report said. It warned that OPEC would therefore be unable to quickly cover a war-induced shortfall from Iraq, which produced 2.49 million barrels a day in February. If U.S.-led forces attacked Iraq during the second half of March, the IEA suggested that it would be May before OPEC could offset the shortfall. U.S. spot prices for light, sweet crude climbed by an average of 8.4 percent in February to $35.75 a barrel, while futures prices peaked at $39.99 on Feb. 27. The average spot price of North Sea Brent, the European benchmark crude, rose by 4.3 percent to $32.67, the report said. Projected oil demand for 2003 is 78.01 million barrels a day. A cold winter and greater industrial use of crude in Asia and North America kept demand strong in January, and seasonal demand should fall by 1.6 million barrels a day in the spring, the IEA said. "I think that's a vast underestimate," said Kevin Norrish, head of commodities research at Barclays Capital. He argued that high crude prices are discouraging consumption and slowing economic growth. "The risk has got to be that we'll see a very, very steep fall in demand in the second quarter," Norrish said, echoing OPEC's fears of a possible drop in prices if Iraqi exports resume quickly after a war. On Wednesday, April contracts of U.S. light, sweet crude rose $1.11 to $37.83 a barrel on the New York Mercantile Exchange. On the International Petroleum Exchange in London, April Brent rose 62 cents to $33.91 a barrel. Last modified: March 12. 2003 5:21PM