www.thestar.com Jan. 14, 2003. 01:00 AM Two Norwegian oil fields idled Supply of crude remains very tight

NEW YORK—Oil prices moved back into positive territory yesterday as two oil field closings in the North Sea renewed worries about global supply despite OPEC's weekend decision to raise output.

The Organization of the Petroleum Exporting Countries at an emergency meeting on Sunday increased production limits by 1.5 million barrels per day (bpd), or 7 per cent, to compensate for six weeks of losses of strike-bound Venezuelan supplies.

Crude oil on the New York Mercantile Exchange settled 57 cents (U.S.) higher at $32.25 per barrel. In London, Brent crude broke through $30 a barrel to reach $30.20 a barrel, 53 cents up on the day.

News of two fires on Sunday that halted operations at the 232,000-bpd refinery in Garyville, La., operated by Marathon Ashland Petroleum LLC, helped lift gasoline prices in the United States by 2.41 cents to 89.60 cents a gallon, traders said.

Forecasts of a cold snap in the United States for the period Jan. 10-25 fuelled a rise in heating oil prices by 1.87 cents to 88.40 cents a gallon.

Dealers said the crude rally was triggered by news from Norwegian state oil producer Statoil that two North Sea oil fields shut down yesterday because of technical problems, cutting production by some 165,000 bpd — a minimal amount on a global scale.

"The fact that the North Sea output problem is supporting the market really shows how tight the physical crude supply is," said Lawrence Eagles of GNI Ltd., a broker of futures and options.

Fears that a U.S. assault on Iraq may be only weeks away are helping support prices that late last month hit a two-year high of $33.65 a barrel for U.S. crude.

"I certainly see (U.S.) oil staying above $30 until the Venezuelan situation is sorted out," said Paul Ashby, oil and gas analyst at ABN Amro in Sydney.

Oil from the Middle East takes four to six weeks to reach U.S. shores, while Venezuelan crude, which normally accounts for 13 per cent of U.S. imports, arrives in about five days.

"There are delays in getting oil from the Middle East to the United States, plus OPEC's agreement is for 1.5 million barrels per day; but prior to the strike Venezuela production was about 2.5 million," said David Thurtell, commodities strategist at Commonwealth Bank in Sydney.

Mexico's energy ministry said the country will raise crude oil exports by 120,000 bpd to 1.88 million bpd from Feb. 1 after the OPEC cartel agreed to raise its output. Non-OPEC Mexico is the world's eighth-biggest crude oil producer and one of the top four suppliers to the United States, along with OPEC members Saudi Arabia and Venezuela and non-OPEC Canada.

U.S. President George W. Bush viewed OPEC's decision to raise oil production as "a welcome step," White House spokesperson Ari Fleischer said yesterday.

"The president views OPEC's action to increase production, particularly given the protracted dispute in Venezuela, as a welcome step," he told reporters. "It will increase global energy supplies and support global economic growth."

But there are worries about how much of the extra oil OPEC can actually deliver.

The 1.5 million bpd increase was divided pro-rata among members — meaning Venezuela was also granted its share of the higher output limit despite the 43-day-old strike that has slashed its exports by 80 per cent to 500,000 bpd.

Many others in OPEC have little or no spare capacity to bump up production, leaving Saudi Arabia to provide the lion's share.

The kingdom has moved quickly to implement the OPEC decision, telling oil majors to expect 10-20 per cent more crude in February, industry sources said yesterday.

Crude traders said the hike had reversed Saudi Arabia's January cuts, made to clamp down on quota busting.

Riyadh fears an oil-price shock that would dent demand for its crude should a U.S.-led war in Iraq come before Venezuelan supplies are restored.

Venezuela, OPEC's third-biggest producer, is fifth in world exporter rankings, while Iraq sells up to 2 million bpd overseas under the United Nations oil-for-food program.    

abcnews.go.com

— SINGAPORE (Reuters) - Oil prices fell one percent on Tuesday after Mexico said it would increase crude exports, while traders speculated that outside mediation might bring an end to the 44-day strike in Venezuela and free up more supplies.

U.S. light crude dropped 33 cents to $31.93 a barrel, retracing half of Monday's 58-cent gain in New York. Crude is still within $2 of the two-year peak at $33.65 struck at the end of December.

"Today's move is on a combination of factors including the Mexican increase, a lot of talk of an end to the Venezuelan strike in a few days and some profit-taking," said a London-based broker.

Mexico said on Monday that it would increase its crude exports by 120,000 barrels per day to 1.88 million bpd following OPEC's weekend decision to raise production by seven percent to make up for the shortfall in Venezuelan oil supplies.

Venezuela's oil output dropped two-thirds in December to just over one million bpd, Energy Minister Rafael Ramirez said on Monday.

The loss in exports has been most sorely felt in the United States, which takes 13 percent of its oil imports from Venezuela.

U.S. fuel stocks fell by a big nine million barrels two weeks ago as the strike choked off an essential supply line into the world's biggest oil consumer. There was little impact last week on inventories, which are hovering close to 26-year lows.

Traders will be keenly awaiting Wednesday's industry data to see if supplies in the United States have declined further.

Oil's reaction to OPEC's agreement on Sunday has been tepid, with traders questioning whether the output hike was too little, too late given the four-to-six-week sailing time from the Middle East to the United States. Venezuelan supplies take five days to hit U.S. shores.

The Organization of the Petroleum Exporting Countries will increase production by 1.5 million bpd on February 1 to 24 million bpd.

The cartel said at the weekend that it would meet again if Venezuelan oil exports were fully restored.

The London-based broker said traders were speculating that mediation by U.N. Secretary-General Kofi Annan and the United States may help break the deadlock between Venezuelan President Hugo Chavez and opposition leaders, who have kept the nationwide strike going since December 2.

www.themoscowtimes.com Tuesday, Jan. 14, 2003. Page 5 Reuters

LUKoil, the largest oil producer in the world's second-biggest exporter, said Monday it would hike output again this year as crude prices hover near two-year highs.

In a statement after a meeting of its board of directors, LUKoil set a production target of 80 million metric tons of crude for 2003 after production grew 2.2 percent to 78.2 million tons last year.

LUKoil's expansion mirrors the resurgence of the energy industry as a whole after a long period of post-Soviet decline. Russia has said it could catch up and even overtake Saudi Arabia as the world's largest oil producer in a few years.

LUKoil is well placed to benefit from oil prices that have shot higher recently because of a long-running strike in Venezuela, fears of a war in Iraq and supply disruptions.

The company also said it aims to produce 5.7 billion cubic meters of gas this year, up from 5.1 bcm in 2002. It set a capital expenditure target of around $2.4 billion for this year.

Leonid Mirzoyan, an analyst at Deutsche Bank in Moscow, said LUKoil's targets were as expected.

"The company's strategy is deferred growth; major production projects will lead to strong growth in 2005 and thereafter," he said.

LUKoil shares were down 0.98 percent to close at $15.15 in Moscow.

LUKoil said exports rose 4.9 percent to 34.3 million tons in 2002 and that its resource replacement ratio was 2.5 times.

Throughput at its refineries rose 9.2 percent to 41.5 million tons while gas throughput increased by 2.2 percent to 2.4 million tons. Petrochemical output rose 34 percent to 1.6 million tons.

LUKoil's statement said it had found new fields in the Caspian Sea basin and Timan Pechora province in 2002.

Russia's oil output is growing for the fifth consecutive year and is set to rise by a further 10 percent in 2003 from the current 8 million barrels per day level.

LUKoil's rivals Yukos and Sibneft both raised oil production by

www.austin360.com

MEXICO CITY (AP)--Mexico will raise its crude oil exports an expected 7 percent as of Feb. 1 as part of efforts by international producers to counter supply concerns in the market, the energy department said Monday.

The department said in a news release that measures taken in late 2002 haven't had the expected effect ``because of the increasing instability in world supply, with a consequent volatility in prices.''

Mexico plans to raise crude oil exports to 1.88 million barrels a day, compared with the target of 1.76 million barrels daily for January.

Monday's decision follows a meeting of the Organization of Petroleum Exporting Countries, in which members agreed to raise output quotas by 1.5 million barrels a day to 24.5 million barrels daily.

The OPEC meeting was aimed at addressing high crude prices, which have been pressured by the general strike in Venezuela and expectations of a U.S. attack on Iraq.

Mexico's energy department said the decision to raise exports complements the OPEC move, and will ``contribute to stabilizing the world oil market and guarantee a continuous and secure supply.''

State oil monopoly Petroleos Mexicanos, also known as Pemex, exported an average of 1.69 million barrels a day of crude oil in the second half of 2002, out of a production of around 3.2 million barrels daily.

Pemex plans to raise its crude production to 3.5 million barrels a day this year.

Mexico isn't a member of OPEC, but in recent years has cooperated on output levels with OPEC and with other independent producers, including Russia and Norway.

www.examiner.com Publication date: 01/13/2003 BY BRUCE STANLEY Associated Press

    VIENNA, Austria -- OPEC members agreed Sunday to boost the cartel's oil production target by 6.5 percent to stabilize a world market jittery over a crisis in Venezuela and the possibility of war in Iraq.

    The increase of 1.5 million barrels a day -- to 24.5 million barrels -- would take effect Feb. 1, OPEC President Abdullah bin Hamad Al Attiyah told a news conference at the group's headquarters in Vienna.

    Al Attiyah confirmed that the Organization of Petroleum Exporting Countries wants to keep prices of its benchmark blend of crudes at $22-$28 per barrel. Friday prices hovered around $30.

    Earlier in the day, Saudi Arabian Oil Minister Ali Naimi said the ceiling should remain at 23 million barrels. Saudi Arabia is OPEC's most influential member and has the bulk of the cartel's spare production capacity.

    OPEC said it wanted to calm fears of a supply crunch caused by an ongoing strike in Venezuela. The agreed output hike was near the upper end of what analysts expected.

    The strike, launched Dec. 2 by political opponents seeking to oust President Hugo Chavez, has slashed Venezuela's exports by about 2 million barrels a day. Venezuela normally is OPEC's third-largest producer and a major oil supplier to the United States.

    "OPEC is trying to send a very strong message that it will do its utmost to stabilize demand and supply," Al Attiyah said after delegates reached their decision in informal talks.

    "Now we will wait for the market to react."

    The United States praised the move, saying the hike would support economic growth and stability.