www.newsmax.com NewsMax Wires Tuesday, Jan. 14, 2003 NEW YORK -- Oil markets reacted with a modicum of bullish skepticism Monday to OPEC's decision to hike its production of crude.

Futures prices went up instead of down Monday on the New York Mercantile Exchange and London's International Petroleum Exchange amid an apparent consensus that the increase in OPEC production by 1.5 million barrels per day would not fully offset the ongoing reduced exports from strife-torn Venezuela.

February crude settled up 58 cents on NYMEX at $32.26 per barrel while the IPE gained 53 cents to $30.20 per barrel.

OPEC voted during the weekend to increase its output by 6.5 percent to 24 million barrels per day. However, the tensions between the United States and Iraq continued to add long-term bullishness to the markets while mechanical difficulties at a North Sea oil field and a refinery in Louisiana contributed short-term price support.

The problems at Marathon's Garysville, La., contributed to a 2.71-cent increase in NYMEX gasoline futures and a 1.85-cent rise in heating oil that contributed to the firmer crude prices, although Iraq and Venezuela appeared to be the greater concern.

"The global market is going to remain tight with ongoing war fears," David Thurtell, a strategist with Commonwealth Bank in Sydney told the British Broadcasting Corp.

The additional OPEC production begins in February, but it takes an additional 4-6 weeks for tankers to sail from the Middle East to the United States.

Meanwhile, Venezuelan President Hugo Chavez has been unable to break the political turmoil and labor strife that has centered on the state oil company Petroleos de Venezuela S.A. (PdVSA), a major source of oil and gasoline for the U.S. refining industry.

In addition, the OPEC increase includes a higher quota for Venezuela -- an integral member of OPEC -- and is believed to be currently capable of shipping nowhere near its present quota due to ongoing labor strife that reached its 44th day Monday.

While Chavez's government has pledged to have PdVSA's production up to 2 million barrels per day by Feb.1, analysts aren't confident that level can be reached without a prompt labor settlement.

Venezuela also produces and markets gasoline in the United States under its Citgo subsidiary. A spokesman for the Lyondell-Citgo Refining (LCR) joint venture said Monday that it expected to increase its production at its Houston plant next week after it had been cut to 50 percent by the Venezuela strike.

"We're pleased that shipments to LCR are now increasing and that LCR has successfully plotted a course that we expect will take it to near-full rates over the next month," said Lyondell Executive Vice President Morris Gelb.

Prior to the strike, the LCR refinery received 230,000 barrels per day of crude from Venezuela and had a total processing capacity of 268,000 barrels per day.

www.vanguardngr.com

Monday, January 13, 2003

  VIENNA — UNITED Arab Emirates Oil Minister, Obeid bin Saif al-Nasseri said, Saturday that OPEC was discussing a production hike of around one million barrels per day (BPD) to stop prices rising due to a six-week-old strike in Venezuela and the threat of a US-led war against Iraq. “Obviously there is a shortage, but we have to see what quantity it requires. We have to discuss it to see if it is one million more or less,” he said upon arriving in Vienna for an extraordinary meeting, Sunday of the Organisation of Petroleum Exporting Countries (OPEC). Saudi Oil Minister, Ali al-Nuaimi said OPEC would move to prevent oil shortages. “I can tell you I support making sure the market is well balanced. There will be no shortage of supply in the market when the market is well balanced,” he said. Al-Nuaimi refused to give figures for what is expected to be an increase of one to two million barrels per day (BPD) in oil production, with the strike in Venezuela keeping some two million barrels BPD off the world market, and hitting the United States particularly hard.

OPEC President, Qatar Oil Minister, Abdullah bin Hamad al-Attiyah said all options are still open as OPEC ministers get ready to meet. OPEC member, Venezuela accounts for around 13 per cent of US oil imports. The strike there has caused US oil stocks to fall at a time when Washington needs them to increase as it prepares for a possible war on Iraq. If the United States launches a war in Iraq before the Venezuelan strike ends, markets could be deprived of about five million barrels of crude oil per day, or even more if the war were to destabilise other Middle East producers.

“Five million barrels a day is a significant shortfall ... There are severe disruptions out there,” said Washington-based analyst, Raad Alkadiri of the PFC Energy consulting firm. “There certainly is a crisis, a crisis OPEC is responding to,” he said. He said the Saudis wanted to show “they can be relied on to provide stability in the market.” But he said the United States may still be forced to dip into its 600-million-barrel strategic oil reserve to make up for shortfalls. 

OPEC increased its combined output ceiling by 1.3 million BPD to 23 million BPD excluding Iraq on January 1, together with a pledge to cut actual production to try to restore credibility in the face of chronic quota busting. A source at the cartel’s Vienna headquarters said that any rise in OPEC production quotas would take effect on February 1 at the earliest, and would probably be rolled back once exports recovered in troubled Venezuela. OPEC’s oil supply is estimated at 75 million BPD. Eight of its 11 members are Arab or Middle Eastern: Algeria, Iran, Iraq, Libya, Kuwait, Qatar, Saudi Arabia and the United Arab Emirates. The others are Indonesia, Nigeria and Venezuela. The cartel has a target price band of $22 to $28 per barrel.

OPEC, which produces about one-third of the world’s crude oil, agreed to meet for the second time in a month after oil prices roared above $30 per barrel in London and New York. A “compromise” agreement on the table here is for an output increase of around one million BPD, with Saudi Arabia pushing for a bigger hike, the Middle East Economic Survey (MEES) reported in its edition to appear Monday, monitored in Nicosia.

“In telephone consultations ahead of the Vienna meeting, Saudi Arabia has pushed for a substantial increase in the ceiling, but has faced opposition,” the industry news letter said, adding that spare OPEC production capacity is now mainly limited to Riyadh and the United Arab Emirates. Indonesia, Iraq, Kuwait and Iran will not be sending their ministers to the hastily called OPEC meeting, although they will still be represented. Analysts said some countries may be staying away since they have no excess capacity to offer.

abcnews.go.com — By Barbara Lewis

LONDON (Reuters) - Oil prices weakened on Tuesday after Mexico said it would increase crude exports, adding to an OPEC production hike, while traders speculated that U.N. talks might help to end a supply-choking strike in Venezuela.

London Brent crude futures stood at $30.07 a barrel, 13 cents down while U.S. light crude fell 21 cents to $32.05 a barrel.

Dealers and analysts said the market remained volatile and was unusually sensitive to news headlines that could trigger major buying or selling by big investment funds.

"It's a market which is having to digest an awful lot of news," said analyst Paul Horsnell of J.P. Morgan.

"Will Mexico increasing output solve the Venezuelan problem? No. Will talks with (UN secretary-general) Kofi Annan solve the Venezuelan problem? Probably not, but it's something to trade on while the market is waiting for the big headline, whether that's something on Venezuela or something on the Gulf," he added.

Prices gained more than half a dollar on Monday despite a weekend decision by the Organization of the Petroleum Exporting Countries (OPEC) to raise official production by seven percent to try to calm the markets and help to compensate for the effects of a protracted Venezuelan strike.

The general strike, which began on December 2, has reduced to a trickle exports from the world's fifth largest oil exporter and key supplier to the U.S. market.

OPEC ALONE NOT ENOUGH

Dealers on Monday expressed concern that the OPEC increase would do little to ease the supply shortage given that Venezuelan crude shipments take only around five days to reach U.S. shores compared with the four-to-six week sailing time from the Middle East.

However, late on Monday, non-OPEC Mexico said it would also increase crude exports by 120,000 barrels per day (bpd) to 1.88 million bpd.

Traders were also speculating that mediation by U.N. Secretary-General Kofi Annan could help to break the deadlock between Venezuelan President Hugo Chavez and opposition leaders.

Chavez is to hold talks on Thursday with Annan.

The United States is concerned that the loss of Venezuelan oil could aggravate the effects on the U.S. economy of a war against Iraq, which President Bush has threatened if Baghdad fails to disarm in line with U.N. Security Council resolutions.

Dealers said that oil markets had weakened slightly on hints that any U.S.-led attack on Iraq might be pushed back until later in the year, but at the same time the United States and its ally Britain have been maintaining pressure on Baghdad.

British Foreign Secretary Jack Straw said on Tuesday that Britain reserved the right to take military action against Iraq without a second U.N. resolution.

www.nydailynews.com By TOM VAN RIPER SPECIAL TO THE NEWS

There's not much relief likely at the gas pump anytime soon, despite OPEC's action on Sunday to raise its daily oil production by 6.5%.

Crude oil prices moved up nearly 2% yesterday to $32.26 a barrel, as traders remained skeptical that the new production would make much difference right away. Oil prices have increased 64% during the past year.

Analysts said that retail gas and heating oil prices are likely to continue to rise. In New York, the average price at the pump of regular gas hit $1.67 yesterday, compared to $1.63 a month ago and $1.29 a year ago.

"It generally takes about three to six weeks for output changes to show up at the pump," said AAA spokesman Robert Sinclair, who added that demand for jet fuel and home heating oil could prevent any early rollbacks in gasoline prices.

"You have an increase in air travel after the post-Sept. 11 lows, and a cold winter thus far in the New York region. This means more competition for crude oil," he said.

In an emergency meeting on Sunday, OPEC agreed to raise production by 1.5 million barrels a day in response to the supply loss caused by a strike in Venezuela that has now reached its sixth week.

"The market is suspicious that this move by OPEC will fix the problem," said George Gaspar, oil analyst at Robert Baird & Co. "Venezuela is still the key. They have not only stopped the refining down there, they have stopped drilling. Even if the strike ends tomorrow, there would still be a significant amount of time needed to ramp up again."

Oil traders also bid up prices yesterday after reports that two Norwegian oil fields in the North Sea would close due to technical problems. This could further trim world oil supplies, despite the OPEC production increase. Originally published on January 14, 2003

www.globeandmail.com Bloomberg News Tuesday, January 14, 2003 – Page B22

Crude oil rose on expectations that extra oil from a production increase by the Organization of Petroleum Exporting Countries won't reach refineries in the United States until March at the earliest.

On Sunday, OPEC members agreed to boost their targets by 6.5 per cent next month to make up for export disruptions in Venezuela caused by a strike. Tankers take at least six weeks to reach U.S. refineries from Saudi Arabia, which has more spare capacity than other OPEC members.

"We've got supply problems and it doesn't look like they'll be solved any time soon," said Ed Silliere, vice-president of risk management at Energy Merchant LLC in New York, which markets gasoline and heating oil to local distributors. "The big worry continues to be Venezuela."

Wheat futures fell to their lowest in more than six months on expectations that U.S. farmers will boost their harvest at a time of weak export demand.

U.S. farmers raised their winter-wheat plantings by 6 per cent from a year earlier to 44.2 million acres, the highest in five years, the U.S. Department of Agriculture reported on Friday. It also pegged the wheat surplus on May 31, the end of the sales season, at 418 million bushels, or 20 per cent more than expected in December, because of poor sales.

Natural gas futures rose for a fourth session in five on expectations that colder weather in the U.S. Midwest and East over the next two weeks will spur a surge in heating demand.

Freezing temperatures are forecast this week from Chicago to Boston and as far south as New Orleans, according to the National Weather Service. The forecast signals increased furnace use that may trim gas supplies, already down 16 per cent from last year, traders said.

Jan. 10 to Jan. 25 will be the coldest two-week period since late 1995 and early 1996 from the Rocky Mountains to the Atlantic coast, AccuWeather senior meteorologist Bernie Rayno said on Friday.