www.stuff.co.nz 16 January 2003

NEW YORK: Oil prices jumped toward two-year highs on Wednesday as US crude stocks sank to nearly their lowest level in more than two decades.

A 45-day oil workers' strike in oil exporter Venezuela has drained world oil stocks.

Fresh signs of a looming US-led war on Iraq further fired supply concerns that have pushed prices up more than 30 per cent in two months and reinforced fears that rising energy costs could stunt economic recovery in the US.

New York light crude closed 83 cents higher at US$33.25 a barrel, within 40 cents of two-year highs struck in late December.

Brent crude futures in London rose 61 cents to US$31.22 a barrel, just three cents below a new two-year-high of US$31.25.

US government data showed crude oil stockpiles fell more than 2 per cent to 272.3 million barrels last week, just 2 million barrels above the lowest level since the government started keeping records in 1979.

The report strengthened fears of an oil supply crunch as the US, the world's biggest consumer of oil, enters peak winter heating demand. Frigid temperatures are forecast in the US's northeast - a heavy consumer of heating oil - in the next 10 days.

The Energy Information Administration warned that "localised disruptions" would occur at US refineries if US crude oil inventories fell below 270 million barrels.

2003-01-16 / Taiwan News, Staff Reporter / By Lisa Wang Formosa Petrochemical Corp., a unit of the Formosa Group, announced unexpected price cuts on local petroleum products yesterday, saying that high international crude oil prices could level off again in the near future in view of OPEC's decision to increase output.

Local petroleum giant Chinese Petroleum Corp., however, decided to keep its prices steady saying that international crude prices will continue to fluctuate, hitting a high of US$32 per barrel.

"We do not see any room for price cuts in the short term," the state-run company said in a statement.

Though crude oil prices climbed on fears of a U.S.-Iraq war and the prolonged oil workers strike in Venezuela, private oil provider Formosa said it expected prices to fall in reaction to the Organization of Petroleum Exporting Countries' promise to raise production quotas.

Formosa cut the price of its unleaded gasoline by NT$0.5 per liter. The new retail prices of 98 unleaded gasoline, 95 unleaded gasoline and 92 unleaded gasoline are NT$21.4, NT$20.1 and NT$19.4 per liter, respectively. Diesel has also been reduced by NT$0.2 per liter to NT$15.5. The new prices take effect today.

In response to Formosa's price cuts, the CPC authorized its gasoline stations to adopt flexible measures with regard to price.

CPC's gas stations are allowed to revise gasoline prices downward by a maximum of NT$0.8 per liter, said Liao Tsang-long (…¿s), manager of CPC's press coordination department.

"I believe most of our gas stations will follow our rival's NT$0.5 reduction," said Liao.

National Petroleum Corp. also said yesterday it would follow suit.

The last petroleum price adjustments were recorded on January 9 when CPC and Formosa raised gasoline prices and diesel by NT$0.5 per liter and NT$0.2 per liter respectively. Formosa's latest price cut has brought petroleum prices back to the pre-January 9 level.

Amid fierce competition in the wake of market liberalization, price adjustments by local petroleum providers have been in tandem, in a bid to prevent a potential loss of customers.

However, such price strategies recently drew the attention of the Fair Trade Commission, which warned the island's three largest petroleum providers - China Petroleum Corporation, Formosa and Esso Petroleum Taiwan Inc. - that joint price adjustments could risk breaching fair trade laws.

www.riyadhdaily.com.sa

Russia can play a leading role in stabilizing global oil markets as prices continue to surge amid fears of war in Iraq and a strike in Venezuela, OPEC Secretary General Alvaro Silva-Calderon said in an interview published Wednesday. "Russia can now play an extremely important role," Silva-Calderon told the Vremya Novostei daily, while urging closer cooperation between Russia and the oil cartel. Russia, one of the world’s top oil exporters but not a member of the Organization of Petroleum Exporting Countries, earlier this month pledged full cooperation with OPEC to boost deliveries and stem the steady rise in world prices.

"Moscow expresses a permanent wish for cooperation, with the goal of stabilizing the world’s oil market," Silva-Calderon told the daily. Russian Energy Minister Igor Yusufov pledged Russia’s cooperation during a visit to Kuwait last week, saying that Moscow was ready to provide Venezuela with tankers to export oil in the face of its six-week-long strike. Silva-Calderon also urged all oil producers outside OPEC to join in on efforts to cooperate. "Certain countries can confirm that they have reached maximum production capacity, but they can always make extra efforts," the secretary general said, commenting on Norway’s refusal to increase production.

www.newsday.com By Associated Press January 15, 2003, 6:11 PM EST

NEW YORK -- Crude oil futures rose sharply Wednesday after data showed a larger-than-expected weekly decline in American inventories.

Data released by the Energy Information Administration earlier Wednesday showed that U.S. crude oil stocks fell by 6.4 million barrels to 272.3 million barrels as refiners unexpectedly stepped up production by 1.1 percent to 92.3 percent of operating capacity.

The decline came despite a slight increase in imports. The data showed that imports rose by 200,000 barrels a day to 8.489 million barrels a day. Despite last week's increase, however, imports are about 1 million barrels a day lower than a month ago, an EIA analyst said.

Separately, the American Petroleum Institute reported that crude oil stocks fell by 3.264 million barrels to 272.236 million barrels last week, as imports tumbled by 676,000 barrels a day to 8.27 million barrels a day.

Despite the disparity in import figures, traders seized on the data as evidence that the seven-week strike in Venezuela continues to cut into U.S. oil inventories.

It was "the kind of report we thought it would take to keep prices on their upward path," IFR Pegasus energy analyst Tim Evans said of the EIA report.

On the New York Mercantile Exchange, February crude surged 84 cents to close at $33.21 a barrel, just shy of a two-year high of $33.65 a barrel hit last month.

Heating oil and gasoline futures rallied in tandem with crude despite bearish petroleum-product stock data.

February heating oil rose 1.70 cent to close at 90.86 cents a gallon, while February gasoline futures advanced 1.27 cent to close at 90.43 cents a gallon.

On London's International Petroleum Exchange, February Brent futures rose 61 cents to close at $31.22 a barrel.

Natural gas for February delivery surged 32.3 cents to settle at $5.430 per 1,000 cubic feet.

The rally in heating oil and gasoline futures was surprising given that the data indicated that refiners continued to build petroleum-product stocks.

The Energy Department report showed that gasoline stocks rose by 5.8 million barrels to 215.6 million barrels, while distillate stocks, which include heating oil and diesel fuel, grew by 2.6 million barrels to 132.3 million barrels.

The API report painted a somewhat mixed picture. It showed that while gasoline stocks swelled by 4.399 million barrels to 215.04 million barrels last week, distillate stocks posted a decline of 104,000 barrels to 134.28 million barrels.

Most analysts surveyed had forecast a moderate decline in both gasoline and distillate stocks.

"Even with the build of nearly six million barrels in gasoline, traders were a lot more interested in what was going on in the crude oil," said Peter Beutel, an analyst at Cameron Hanover in Connecticut. "The bottom line is that the major fundamental factors are still in effect, those being the strike in Venezuela and fear of a war with Iraq."

There was little indication Wednesday that either Iraq or Venezuela is going to go away as a bullish factor in the market.

The U.S. made a formal request Wednesday for limited help from the North Atlantic Treaty Organization in the event of a war with Iraq.

www.forbes.com Reuters, 01.15.03, 5:56 PM ET

WASHINGTON, Jan 15 (Reuters) - The Energy Department said late on Wednesday it renewed for another five years the contract it has with DynMcDermott Petroleum Operations Co. to run the U.S. government's Strategic Petroleum Reserve.

Under the contract, the company will be paid $120 million a year to maintain the readiness of the emergency oil stockpile's four storage facilities located in Louisiana and Texas.

The contract could also be extended for another five years. The stockpile has been the subject of much debate recently as some lawmakers have urged the Bush Administration to release oil from the reserve to offset lost supply due to the long strike in Venezuela.

The reserve, which currently holds 599 million barrels of crude, was created by Congress in the mid 1970s after the Arab oil embargo. The oil is held at the four sites in large underground salt caverns.

DynMcDermott was formed solely to operate the reserve. It is jointly owned by non-public DynCorp, McDermott InternationalInc. (nyse: MDR - news - people), Jacobs Engineering Group (nyse: MDR - news - people) and privately-held Internationl-Matex Tank Terminals.