abcnews.go.com

— LONDON (Reuters) - World oil prices surged to fresh two-year highs on Tuesday as the United States urged the U.N. Security Council not to shirk difficult choices and a military buildup in the Gulf fueled speculation that war is looming.

U.S. light crude in electronic trade rose 61 cents to $34.52 a barrel, its highest since December 2000. London Brent blend added 53 cents to $31.18 a barrel.

Dealers said a seven-week-old general strike in Venezuela that is sapping oil exports and the killing in Kuwait of a Defense Department employee near a U.S. military base also helped pull prices higher.

"The markets are still very edgy with both Venezuela and Iraq remaining the key issues against a backdrop of increasing demand and falling inventory," said Australian-based independent oil analyst Simon Games-Thomas.

"Prices appear destined to trade higher given the current set of drivers and $35 beckons inexorably in the short term," Games-Thomas said.

Secretary of State Colin Powell, addressing fellow Security Council members on Monday said: "We must not shrink from our duties and our responsibilities when the material comes before us next week. We cannot be shocked into impotence because we are afraid of the difficult choices that are ahead of us."

Chief U.N. weapons inspector Hans Blix will deliver a major report on Iraqi weapons to the United Nations next Monday and the Security Council evaluates the report on January 29.

Blix spoke to reporters in Athens on Monday after a two-day visit to Baghdad. "The Iraqis became aware that the world is disappointed with their declaration," he said of Iraq's 12,000 page dossier.

"They have to create confidence in the world that they don't have weapons of mass destruction."

Iraq said on Monday it would offer the inspectors more help and would form its own teams to search for any banned weapons.

Blix said that Baghdad had refused to allow U2 reconnaissance flights over its territory. "They put up a number of conditions that were not acceptable to us," he said.

Iraq wants to accompany the planes with its own aircraft, but would be prevented from doing so if the weapons inspectors flew to the north or south of the country because of no-fly zones patrolled by U.S. and British planes since 1991.

Britain said on Monday it was mobilizing some 30,000 troops to join the tens of thousands of U.S. troops already in the Gulf.

STRIKE, DAY 51

In Venezuela, foes of President Hugo Chavez extended a nationwide strike into the 51st day, aiming to force the leftist leader to resign and call immediate elections.

The strike has strangled oil supplies from the world's fifth-largest exporter, which accounts for about 13 percent of U.S. petroleum imports.

Exports of only 500,000 bpd, a fifth of normal flows, have cut U.S. commercial crude stockpiles close to 26-year lows.

www.nytimes.com By ERIC PFANNER

LONDON, Jan. 20 — The surge in oil prices caused by a loss of production at a leading exporter and the possibility of an American-led attack on another has created a rare spectacle: the president of OPEC, a cartel once feared for its ability to control prices, publicly complaining that current levels are too high.

Those were the straits into which Abdullah bin Hamad al-Attiyah, president of the Organization of the Petroleum Exporting Countries, was forced last week as oil prices hovered at two-year highs.

Only days before, OPEC ministers meeting in Vienna had agreed to step up production in an unsuccessful effort to keep prices from rising further, after antigovernment strikes in Venezuela had virtually halted exports from that country and the threat of war in Iraq had raised the prospect of shortages.

Though the 10 OPEC members — 11 counting Iraq, whose production is monitored by the United Nations — still pump a third of the world's oil, their power is a far cry from the 1970's, when an oil embargo sent the global economy into recession. After oil prices fell into single digits in 1998 and 1999, OPEC managed to engineer an increase, but only when it acted in concert with several nonmember countries. Getting prices to fall has proved more difficult.

In part that is because other producers have stepped up output and exports, reducing OPEC's market share. The group still has a virtual monopoly on spare capacity. While demand for oil has risen slowly during a global economic downturn, that capacity is not enough to deal with the unexpected overlap of production losses in Venezuela and, possibly, Iraq. OPEC's response in Vienna, colored by internal politics, failed to send the clear message that the market needed to bring a cap on prices.

"The oil business is feast or famine," said Gary N. Ross, chief executive of the PIRA Energy Group, an international energy consultancy in New York. "They are trying to wrestle with a beast that's very hard to get your arms around."

Mr. Ross said OPEC deserved credit for keeping prices within a range of $22 to $28 a barrel for about two-thirds of the time since March 2000, when ministers decided that level would balance their needs for revenue with those of a global economy hungry for affordable oil. OPEC was concerned that if the price strayed stubbornly above that range, it could affect long-term demand, as importers would turn to non-OPEC producers, invest in developing their own supplies and seek alternative energy sources.

As strikes against the government of President Hugo Chávez turned off the taps on Venezuela's nearly three million barrels a day of oil output in December, analysts say Saudi Arabia, in particular, has been keen to show its good intentions. Stung by anti-Saudi sentiment in the United States in the wake of the terrorist attacks, Saudi Arabia has sought to reassure the market that it stands ready to make up the shortfall.

"They have made a virtue out of necessity," said Peter Gignoux, head of the petroleum trading desk at Schroder Salomon Smith Barney in London. "If they put more oil on the market they can wrap themselves in the mantle of global citizen."

But the agreement reached in Vienna, in an emergency meeting called at the request of the Saudis, left unclear how much oil would actually reach the market, and when. Instead of simply announcing a temporary increase in production quotas for those countries most capable of closing the gap — Saudi Arabia and the United Arab Emirates — OPEC came up with a political solution.

In an effort to ease Venezuela's fears of losing market share, the group raised the quotas for all members on a proportional basis, including Venezuela, which is pumping only a fraction of the oil allowed under its old, smaller allotment of 2.65 million barrels a day.

"The actual amount of what you are getting from the OPEC decision is so much less than what they are saying," Mr. Ross said. OPEC raised its overall production quota to 24.5 million barrels a day, from 23 million, as of Feb. 1, but analysts say production will probably fall short by at least one million barrels.

Since the meeting, Saudi Arabia has said it will produce as much as nine million barrels a day by February, a million more than even the new quota prescribes, in an effort to keep the markets supplied. But that oil takes six weeks to reach American ports, rather than the one-week trip for Venezuelan shipments.

As talk of war in Iraq heats up, oil buyers are eager to lock in supplies, even at the current high prices. In London on Monday, the price of Brent crude for March delivery rose 11 cents, to $30.65 a barrel.

"Oil prices at the moment are not determined by fundamental supply and demand but by psychology," said Axel Bush at the Energy Intelligence Group in London.

U.S. Lobbies Oil Exporters to Produce More

sf.indymedia.org by Just the Facts • Tuesday January 21, 2003 at 02:14 AM

Many people assume that the war is really about oil. While there can be no doubt that the lure of the Middle East to Britain, Europe and America has always been primarily the oil, I think it's safe to say it's not worth rushing into war for oil based on the facts below. The theory that it's really a war that Zionists in American government want for Israel and Zionists' sake makes more sense, horribly so.

"The oil “giant” Saudi Arabia supplies 15% of US oil imports, only marginally more than Venezuela and Canada. Mexico, the fourth biggest supplier to the US, provides 12%. The other major oil suppliers to the US are, in order of importance: Nigeria, Iraq, Colombia, Norway, the UK and Angola. " This is from an article on the website www.greenleft.org.

Obviously, Bush's push for war has to be more than just about Iraq's oil, more than just about "Iraq is a threat to the US" even though it is half around the world away with a shadow of the military weaponry it had in 1998 according to people like Scott Ritter, and more than Daddy Bush's supposed frustrated wish to take out Hussein, and obviously nothing to do with setting up a "democracy" in Iraq or caring two figs about the Iraqi people.

Face it. The obvious reason for war on Iraq now, is because Israel is pushing for it. Israel wants to US to fight all it's self-made enemies (who could possibly be friends with the likes of the Zionists who have stolen the Palestinian's homeland, and continue an on-going ethnic cleansing campaign against the Palestinian people, and who started the Six Day War in 1967, stealing more land from its neighbors, etc, etc, it's encyclopedic!). Israel wants to be in control of the Middle East "for the US"--- NOT! I don't trust Israel one little bit! Israel would turn on the US in a heartbeat if it could. Zionists are just using the US for their own completely selfish racist reasons--- for a Jewish supremacist empire, fueled by American dollars, and American lives. Can I put it anymore bluntly?

We the people must put an end to the rapacious Zionist influence on American politics and policies, especially in US foreign policy! Zionism is the ugliest form of racism today in the the world and bringing us to WWIII. We must stand up and say NO to all racism! No US support, no tax dollars and no diplomatic support of Israel in the UN, not until it is transformed into a true democracy with equal rights for all regardless of religion, etc. No racist / religious ideology must be allowed to affect US policies!

www.abs-cbnnews.com

New players Total and Eastern Petroleum Corp. Monday rolled back the 40-centavo per liter increase implemented on their diesel prices last week after the country’s major oil firms decided to adjust the prices of their gasoline products by 60 centavos per liter.

“To maintain market competitiveness, Total will reduce its prices by 40 centavos per liter for diesel and kerosene effective 2 p.m.,” a company official said Monday.

Eastern Petroleum Corp. president Fer Martinez, meanwhile, said the supposed increase in diesel could still be implemented “depending on the move of its competitors.”

Total raised its gasoline prices by 60 centavos a liter on Friday while Eastern implemented its price adjustment by the same amount on Saturday.

The rollback in diesel and kerosene was announced Monday.

The price reduction came after market leader Petron Corp. increased only its gasoline prices Monday. Pilipinas Shell also implemented the same price adjustment on Satuday. Both firms said the increase was necessary to recover the Clean Air Act (CAA) implementation costs they have incurred.

“The increase reflects additional cost for CAA compliance. There will be no movement on diesel and kerosene,” Petron and Shell said separately.

Monitoring by the Department of Energy showed that uncertainty in Iraq and the ongoing strike of petroleum workers in Venezuela have pushed up market prices both world crude oil and refined petroleum products. L. Lectura

Please send your comments or feedback to newsfeedback@abs-cbn.com

abcnews.go.com — By Richard Mably

LONDON (Reuters) - Oil prices ticked higher on Monday as top U.N. weapons inspectors spent a second day in Iraq and the United States said time was running out for Baghdad to prove compliance with disarmament resolutions.

London Brent blend in early trade added 19 cents to $30.73 a barrel. U.S. crude, closed on Monday for Martin Luther King day, set a new two-year high of $34 a barrel on Friday.

Washington on Sunday issued one of its clearest warnings yet to Iraqi President Saddam Hussein that non-cooperation with U.N. inspectors could be deemed a trigger for a war in the absence of a "smoking gun," or hard evidence of weapons of mass destruction -- and that a decision could be just weeks away.

"The test is, is Saddam Hussein cooperating?" said Defense Secretary Donald Rumsfeld on weekend television. "He's not doing that."

Rumsfeld, presiding over a huge U.S. military build-up of warplanes, ships and tens of thousands of troops in the oil-rich Gulf region, said a final conclusion on Iraqi cooperation could be made "in a matter of weeks, not in months or years."

"Of course Rumsfeld is a hawk, but if the test of compliance is cooperation then clearly Saddam is not cooperating," said oil broker Nauman Barakat of Fimat International Banque.

Chief U.N. weapons inspector Hans Blix and Mohammad ElBaradei, head of the U.N. nuclear watchdog, say there are big gaps in Baghdad's arms declarations, and are demanding quick answers before they report to the Security Council on January 27 on Iraqi compliance.

"I think (the Iraqis) have said that there are still certain areas they are ready to provide more information. I think that in other areas they said they are ready to reconsider their position," ElBaradei said in an interview with Reuters.

"What we tried to do today at this meeting is to impress on the Iraqi authorities that the time is running out."

U.S. national security adviser Condoleezza Rice, on U.S. weekend television, said: "Clearly the 27th is an important date ... (It) probably marks the start of a last phase of determining whether the Iraqis have fully complied."

EXILE

From Beirut, a special envoy of Saddam's dismissed talk of the Iraqi president going into exile.

"As we have said before, we reiterate now that this is merely nonsense and one of the tactics of psychological warfare," said Ali Hassan al-Majeed, a member of the Revolutionary Command Council and a cousin of Saddam.

Rumsfeld said he hoped Saddam would choose exile, but he was unsure of the prospect. "There is at least a possibility," he said. "His neighboring states are in a process now of trying to avoid a conflict there by having him leave the country."

Saddam remained defiant.

"After putting our faith in God, victory is absolutely assured. We don't see it on the horizon, rather it is in our grasp and inside our chests," he told a group of army officers.

Oil traders said Venezuela's general strike, now in its seventh week, also was keeping the heat under crude prices.

Venezuelan President Hugo Chavez said on Sunday he was "winning the oil war," restoring crude flows and restarting ports and refineries. He said oil output which fell to 500,000 barrels per day this month was now at 1.2 million bpd, versus three million bpd normally.

Striking oil workers said that production was only half the volume given by Chavez.

Leading OPEC producer Saudi Arabia is moving to fill the gap by raising output by between 500,000 and one million barrels a day, industry sources said.

Riyadh is opening up the taps and by February could be pumping nine million bpd, the industry sources said on Sunday from eight million recently.

"The Saudis are cranking it up. The message is that there is a big increase on the way," said one senior Western oil executive.