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— LONDON (Reuters) - Oil prices moved back into positive territory on Monday as two oilfield closures in the North Sea renewed worries about global supply despite OPEC's weekend pact 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, seven percent, to compensate for six weeks of losses in strike-bound Venezuelan supplies.

London Brent crude broke through $30 a barrel to reach $30.05 a barrel while U.S. light crude rose 28 cents to $31.96.

Dealers said the rally was triggered by news from Norwegian state oil producer Statoil that two North Sea oilfields shut on Monday 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.

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

Analysts said Monday's earlier price fall had been contained because traders saw no short-term relief for crude inventories in the U.S. that are near 26-year lows.

"It's just enough for the moment but it's not going to push prices down much," said Adam Sieminski of Deutsche Bank in London of the OPEC pact.

"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 percent 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.

"The global market is going to remain tight and with ongoing war fears, you've got to be pretty brave to sell oil at the moment."

SPARE CAPACITY

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 percent 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 Europe based majors to expect 10-20 percent more oil in February, industry sources said on Monday.

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

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

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

Signs are that dealers are already planning to go without Baghdad's crude, cutting back on Iraqi purchases under the U.N. humanitarian exchange, in case war prevents delivery.

In recent weeks Iraqi exports have been running near full capacity but industry sources said on Friday that sales for the week had dipped by half to just 900,000 bpd.

OPEC President Abdullah al-Attiyah said on Sunday ministers would meet again if Venezuela restores full production. The group's next scheduled gathering is for March 11.

OPEC's agreement brings the cartel's official production ceiling for its 10 members bound by quotas to 24.5 million bpd.

english.pravda.ru 19:35 2003-01-13

Saudi Arabia denied the leadership among oil exporting countries for the third time already

Despite the efforts taken to save appearances, OPEC seems to have lost its control over the world’s oil markets (the control is lost for a while, but still). In the end of the previous year, responsible OPEC representatives told that there was enough hydrocarbon stuff, that prices were within the limits determined by OPEC itself and that all problems were just temporary. However, the situation proved to be different in fact. The continuous strike in Venezuela paralyzed one of the most active OPEC members. And the oil prices exceeded the fixed limits. Moreover, the disputes concerning leadership inside the oil cartel have even aggravated. A crisis was brewing for a long period already until it broke out at the 123rd OPEC conference in Vienna.

Mass media accredited at the OPEC headquarters in Vienna report, many ministers protested against a complete gathering of all OPEC members. The recently held 122nd OPEC conference decided to increase oil quotas up to 23 million barrel per day starting with January 1. Even new president of the OPEC conference, Qatar’s Minister of Energy and Industry, Abdullah Bin Hamad Al-Attiyah, known for his extremely cautious and weighted tactics, offered to discuss the problem of changing the oil production quotas and export oil supplies in a telephone conversation. However, as Russia’s news agency RIA Novosti thinks, the OPEC general secretariat decided to summon an extraordinary OPEC conference on January 12, which is said to be done on the advice of Venezuela’s former oil minister, incumbent OPEC secretary general, Alvaro Silva Calderon.

As could be expected, the conference failed to take place. For this or that reason, almost half of the oil ministers from 11 OPEC member countries couldn’t come to Vienna (probably they just didn’t want to). And as all decisions in the oil cartel are taken unanimously, it was immediately decided to transform the conference into an informal meeting of especially anxious oil ministers. However, even in this reduced format, the meeting looked very much like a football match. Finally, Saudi Arabia openly spoke about its particular role in the oil world.

As RIA Novosti states, until recently Saudi Arabia couldn’t be considered an unconditional OPEC leader because of Venezuela’s too active position and because of Venezuela President Hugo Chavez’ personal position. He actively interfered into the affairs of the oil cartel and his aggressive position was supported by another OPEC member, Iran and Iranian President Mohammad Khatami, who in his turn feared that the Saudi Royal Family might get stronger.

As it happened in fact, the Venezuela president is currently more anxious about domestic affairs, not some world-scale ambitions. A nation-wide strike instigated by workers of Latin America’s largest oil and gas monopoly, Petroleos de Venezuela, continues for 1.5 months already. Within this short period of time, Venezuela has turned from the world’s largest oil exporter into the largest oil importer. Not to mention its ambitions concerning OPEC.

Saudi Arabia Minister of Oil Al-Naimi has taken the bull by the horns: he said that as far as Venezuela fails to meet its oil commitments, generous and long-sighted Saudi monarchy would save the situation. And if so, the quotas shouldn’t be raised. It was emphasized that Saudi Arabia would easily compensate for the absence of Venezuela in the oil cartel. However, the Saudi minister of oil went further and declared that the country would supply not 10, but 15 million barrel of oil to the international markets daily. The amount was said to be enough to cover all possible deficits of oil in the world.

But for one snag, the Saudi suggestion could have been actively supported in OPEC. If the suggestion were adopted, it would be perfectly obvious who were the master of the situation. What is more, it would be openly declared that OPEC was a dummy. We would like to mention that American officials declared several times already that OPEC was outdated, and the situation would be even much better without the organization. At the same time, the USA started strictly criticizing Saudi Arabia, and it also declared “a new format” of energy cooperation with Russia (the cooperation that seems to have faded away during the Houston summit already). After that, Russia paid significant attention to China that urgently needed oil; as soon as Russia evinced its interest toward China, Japan and South Korea immediately rushed to talk it out of the intention to supply oil to China.

Even the most short-sighted OPEC members understood that the oil cartel would fall to pieces if the role of Saudi Arabia strengthened. The suggestions submitted by Al-Naimi were rejected, and the format of the conference was transformed into an informal meeting. As a result, OPEC will once again increase oil production quotas by 1.5 million barrel per day starting with February 1. However, experts say that even this increase won’t compensate the absence of Venezuelan oil on the markets. That is why all words concerning avoidance of a global energy crisis and about stabilization on the world market still remain only the words. OPEC all the same continues its favorite dangerous game: it teases stagnating economies of the Western countries with sickly dependence upon suppliers of raw stuff. At that it’s perfectly clear that humiliated Saudi Arabia benefits from this situation. Because under these conditions it won’t be stopped with any punitive discipline and will compensate the oil shortage in the world without prior arrangements.

It is quite clear that if the struggle for resources has reached such tension, the largest oil supplier will fight not for ordinary markets, but for new ones. And this is likely to be a success. At least, Russia experiencing an acute crisis of its fuel and energy complex won’t be able to hamper this expansion.

Under such conditions it makes no difference any longer if the situation in Venezuela improves rather soon. Iran, Venezuela together with the United Arab Emirates or Kuwait will once again re-establish the domination of “the weak” over OPEC and regain their profits from control over the oil markets. The strong OPEC members seem to have decided that the oil cartel is a useless anachronism that must be put an end to. And if the supposed scenario of the situation in Iraq (overthrowing of Saddam Hussein, splitting of Iraq into several sovereign states, withdrawal from OPEC, etc.) is put into practice, the influence of the oil cartel will be so insignificant that nobody will strive for the leadership in the organization.

Dmitry Slobodanuk PRAVDA.Ru Translated by Maria Gousseva Read the original in Russian: economics.pravda.ru

money.cnn.com Oil prices, economists, analysts unimpressed with cartel's call for increased production. January 13, 2003: 4:26 PM EST

NEW YORK (CNN/Money) - Oil prices fell briefly Monday after OPEC's decision this weekend to boost production, but analysts doubted the cartel would do enough to make a significant change in prices or in the U.S. economy -- and news of a new supply disruption sent prices rising again.

The Organization of Petroleum Exporting Countries (OPEC), a group of 11 nations that supplies about 40 percent of the world's oil and sits on about 75 percent of all the world's known oil reserves, agreed Sunday to boost production by 6.5 percent, or 1.5 million barrels per day, to 24.5 million barrels per day.

But the increased output quota, which takes effect Feb. 1, does not even make up for the estimated 2 million barrels per day lost because of an oilworkers' strike in Venezuela, OPEC's third-largest oil producer.

The strike has pushed oil prices to more than $30 a barrel, well above OPEC's target price of $22-to-$28 a barrel. Higher prices could be bad news for OPEC if they keep a lid on oil demand.

Higher prices are certainly bad news for the U.S. economy, acting as a tax on anybody who needs to buy petroleum products on a regular basis -- in other words, pretty much everybody.

"Rising oil prices are quite unhelpful, and falling prices are quite helpful in terms of giving stimulus to the economy," said Rory Robertson, interest-rate strategist at Macquarie Equities (USA). "Lower prices feed through pretty well to everyone immediately."

But the initial drop in prices following OPEC's announcement was pretty puny, and it disappeared by the end of the day Monday, after news of the shutdown of two oil fields in the North Sea.

The price of a barrel of light crude oil for February delivery rose 58 cents to close at $32.26 in New York trade. In London, Brent crude jumped 67 cents to settle at $29.40.

"The fact that the North Sea output problem is supporting the market really shows how tight the physical crude supply is," GNI analyst Lawrence Eagles told Reuters.

Unfortunately, oil prices don't seem likely to go much lower at least until the Venezuelan strike ends, according to many oil analysts. Even then, lingering uncertainty about the potential for a U.S.-led war in Iraq -- OPEC's fourth-largest producer -- will keep prices high.

"We're not likely to see oil prices going lower until there's resolution on the Iraqi front," said Fadel Gheit, oil analyst at Fahnestock & Co.

Gheit and other analysts also pointed out that OPEC's production target is probably not even realistic. For example, OPEC's plan calls for Venezuela to boost its production to about 2.6 million barrels per day. That's going to be tough to do when oil workers aren't working; Venezuela's exports have been cut to about 500,000 barrels per day and aren't likely to increase until its strike is over.

Aside from Saudi Arabia, other OPEC nations have little spare production capacity, and OPEC is probably reluctant to boost production too much, anyway, considering the possibility that several factors might come together to drive oil prices much lower in coming months.

By March, Iraq and Venezuela could be sorted out, world oil consumption will be falling, and a brutal winter in Russia, the world's second-biggest oil producer, will be ending. This combination could lead to oil prices plunging $10 a barrel, Gheit said.  

allafrica.com Mike Oduniyi Lagos

OPEC agrees new ceiling of 24.5m bpd _NNPC, JV Partners to meet

Nigeria's official crude oil production quota has been increased by another 124,000 barrels per day (bpd) to 2.018 million bpd, giving a boost to Federal Government's finances for the 2003 fiscal year.

The seven percent increase in the country's quota (the largest production quota Nig-eria was getting in two years), came after the Organization of the Petroleum Exporting Countries (OPEC) agreed at its 123rd (Extraordinary) meeting yesterday in Vienna, Austria, to raise its ceiling from 23 million bpd to 24.5 million bpd, with effect from February 1, 2003.

Nigeria's quota had earlier been raised by 107,000 bpd to 1.89 million bpd effective this month over last year's level of 1.78 million bpd.

OPEC had called the emergency meeting in response to sharp drop in oil supply to the world market occasioned by the crippling strike in Venezuela, the group's third largest producer.

The shortage in supply had fueled a sharp increase in oil prices, hovering above $30 per barrel in the last three weeks.

"Having reviewed the oil market situation, especially the demand/supply picture for the first quarter 2003, and in light of tconference decided to raise the OPEC-10 ceiling from 23 mb/d to 24.5 mb/d, with effect from 1 February 2003, in order to ensure adequate supplies of crude to consumers and restore balanced market conditions," OPEC said in a statement posted to its website.

"The conference reiterated its hope that a swift and peaceful resolution of the present situation in Venezuela could be found, in both the interests of the people and government of the country.

"In this regard, the conference extends its support to Venezuela in its efforts to restore its market share.

"The adjusted ceiling will be reviewed at the next ordinary meeting of the conference, which ministers re-confirmed would take place on 11 March 2003.

"Member countries affirmed their commitment to the new production level and their intention to ensure that prices remain within limits deemed acceptable to both producers and consumers."

The decision, according to analysts, was expected to calm the market and prevent further price increases, although some analysts thought the increase was not enough to fill the gap in oil production caused by a continuing general strike in Venezuela.

The latest development represents a booster for the Federal Government, which faced hard times last year following shortfall in oil income. Oil exports account for more than 90 percent of Nigeria's foreign exchange earnings.

President Olusegun Obasan-jo's 2003 budget predicated on a total revenue of N1.819 trillion, envisaged oil earnings at N1.120 trillion based on a production quota of 1.788 million bpd based on official selling price of $22 per barrel.

Meanwhile, the Nigerian National Petroleum Corporation (NNPC) and the chief executives of joint venture oil companies will meet this week to work out modalities for the management of the increase in the country's oil production.

THISDAY checks reveal that the talks will also center on Nigeria's response to call for more crude oil supply to the international market as well as implementation of some Federal Government's directives on local content inputs in the oil industry billed to take off this month.

Preliminary discussions on management of new crude oil production was held in Lagos at the weekend between the NNPC management led by the Group Managing Director, Mr Jackson Gaius-Obaseki and Shell Petroleum Development Compa-ny (SPDC) led by its Managing Director, Mr Ron Van de Berg.

The Federal Government had been joggling figures on how best to accommodate oil production from a series of new deepwater fields expected to come on stream later this year into its OPEC quota, which only got a booster yesterday.

Presently, output capacity has even grown much from existing onshore and offshore fields as well as shallow waters, reaching 2.8 million bpd by the end of last year.

For instance, Shell's shallow water field, EA, came on stream last December with capacity expected to grow to 140,000 bpd and is yet to be accommodated in Nigeria's OPEC quota.

More concern for the Federal Government is when deep offshore fields developed under Production Sharing Contracts (PSCs) are completed, meaning that the government would not share from profits earned from oil exports from the fields until the operators recoup their investment.

Italian oil firm, Agip, is expected to begin production from its deep offshore field, Abo, early next month. So also is TotalFinaElf's Amenam offshore field that will produce around 125,000 bpd in June this year.

Sources, however, said that this week's talks will also dwell on implementation of government's policies on local content inputs in the oil industry, billed to commence this month.

These include achieving 30 percent local content in all oil projects, execution of engineering design of projects in the country, and conducting technical evaluation and project review in Nigeria.

The National Petroleum In-vestment Management Services (NAPIMS), an NNPC subsidiary is charged with the implementation of these policies.

Gaius-Obaseki who dropped the hint of the challenges facing the industry in the days ahead, said in Lagos at the weekend that the corporation aimed at sustaining the growth it achieved last year. He said that the government would surely come up with solution to the issue of production from joint venture fields and PSC fields "to the best interest of the country."

"We have been having series of meetings since December 27 (2002), to address immediate issues of having no interruptions," said the NNPC chief.

"Recently, we have an increase in quota, and an emergency meeting comes up on Sunday (yesterday) to take a decision on further increase. We intend to sustain the growth which we commenced earlier."

Gaius-Obaseki said Nigeria was capable and ready to raise oil supply to the international market if called upon to do so.

"We are ready, and fully prepared to meet any call on us for more oil," said the NNPC chief.

"In fact what should worry us is if we are told to shut down. Our capacity has grown tremendously recently," he added.

www.wisinfo.com Mon, Jan 13, 2003

Gannett Wisconsin Newspapers and The Associated Press Wisconsin motorists are paying an average of 18 cents more per gallon for gasoline than they did in December, and prices are expected to climb steadily over the next three months.

"This is a time of year when typically gas prices are down, but obviously that's not happening," said Mike Bie, a spokesman for the Wisconsin AAA.

Local gas prices per gallon

Location Unleaded Premium Marshfield The Store $1.51 $1.67 Baltus Bread & Butter Shop $1.51 $1.67 Weiler Convenience Store $1.51 $1.66 Abbotsford Abbotsford Oil $1.52 $1.72 Stratford Central Wisconsin Co-op $1.52 $1.59

Wisconsin motorists on average paid $1.53 per gallon of unleaded gasoline this week, compared with last month's average state price of $1.35 per gallon.

Jim Maurer, a salesman from Spencer, said the climbing prices will not affect how much he'll drive his GMC Yukon. Every week, Maurer spends $60 to $90 on gas.

"Gas prices vary from 10 cents to 20 cents over or under what they are right here. I'll use the gas wherever I go," Maurer said, as he waited for his car to get washed at Baltus Bread & Butter Shop, 539 S. Central Ave.

Even if war is averted in Iraq, motorists should be ready to pay at least a dime a gallon more for gasoline this spring, the Energy Depart-ment says. Turmoil in Venezuela - including an oil workers' strike - has shut down oil production. Imports from Venezuela probably won't return to normal before summer - if then.

Last year, Venezuela shipped about 1.5 million barrels a day of crude and refined gasoline into the United States, about 13 percent of U.S. imports.

Only five states - Rhode Island, New York, Connec-ticut, Alaska and Hawaii - and Washington, D.C., had gas prices this week that on average were higher than Wisconsin, according to the AAA. Part of that has to do with the state's gasoline tax, Bie said. The current state tax is 31.1 cents per gallon, with 18.4 cents per gallon taxed by the federal government.

An impending war with Iraq could send those prices even higher. Economists and energy experts have said serious worldwide crude shortages could develop if war erupts in Iraq and the country's imports disappear while Venezuela's oil fields remain crippled.

"We were paying higher prices in September with speculation that we were going to war with Iraq," Bie said.

A warm, snow-free winter even has hurt gas company sales, too. "Lack of snow has been more of a factor than prices," said Jim Cooper, of Cooper Oil, 2172 Prairie St. "We're not getting the snowmobile traffic we would normally get this time of year." Amy E. Bowen contributed to this story.