Money April 1, 2003: 11:01 AM EST

Nation's biggest union calls off a 3-day strike set for Tuesday, raising hopes for normal output.

LONDON (Reuters) - World oil prices eased Tuesday after the cancellation of a general strike in Nigeria raised hopes that output closed by ethnic clashes in the West African OPEC member might soon return to normal.

At around 10:45 a.m. ET, light crude for May delivery shed 79 cents at $30.25 a barrel on the New York Mercantile Exchange.

In London, benchmark Brent oil fell 25 cents to $26.30 a barrel. Prices eased after Nigeria's biggest union called off a three-day strike originally scheduled to begin on Tuesday.

"News of the agreement on the Nigerian strike has given the market some breathing room," one London oil trader said.

While the 12th day of war Iraq and prevented a steeper price fall, dealers feared a strike would have further deepened the crisis in Nigeria, the world's eighth-largest oil exporter.

Tribal clashes have shut nearly 40 percent of Nigeria's 2.2 million barrels per day of crude production for more than a week. Oil producers Shell and ChevronTexaco have said they will not resume operations from Forcados and Escravos in the western Niger swamps until they can be sure of their staff's safety.

Nigerian and Iraqi jitters have helped support oil prices in recent days after the market lost a quarter of its value in the approach to the start of the war when dealers took the view that Baghdad would not resist for long.

War worries have been countered by world supplies sufficient to meet lower seasonal demand in the second quarter.

"What's driving prices right now is the offset between supply security fears, balanced against expectations of softer demand, which you normally get at this time of the year," said Kevin Norrish, energy analyst at Barclays Capital.

While the war has put a halt to Iraq's 1.8 million bpd of crude exports, the Organization of the Petroleum Exporting Countries has compensated with increased supplies, with U.S. ally Saudi Arabia in March hitting its highest production level in 21 years

"As far as the war is concerned, we have lost Iraqi supplies but clearly OPEC is still managing so far to make up for that," Barclay's Norrish said. Gasoline

Global energy demand on the 77 million bpd world market normally drops about two million bpd in the second quarter when warmer weather sets in the United States and Europe.

Demand then picks up again when gasoline consumption by motorists rises in the summer holidays.

Nigeria's high-quality crude, ideal for gasoline production, is missed because it is a popular feedstock among U.S. refiners.

Gasoline stocks in the United States are below year-ago levels as the world's biggest consumer of motor fuel gears up for peak demand. Click here to check CNN/Money's commodities page

"Looking at where U.S. gasoline inventories are and where prices are, lots will depend now on how soon Venezuela will get its gasoline production back to normal," Norrish said.

Venezuela, struggling to get production back on stream after a crippling opposition strike, said it will restart gasoline exports this week to the United States and expects all refining and exports to return to normal in four to six weeks.

The strike had contributed to extremely tight oil inventories in the West even before the war in Iraq.

Analysts polled by Reuters predict that U.S. data due Wednesday will show a large crude stock rise after a week of heavy imports.

The Mercury News From correspondents in New York 01apr03

OIL prices gushed higher overnight, fuelled by fears of a bloody, drawn-out war in Iraq and fresh reports of unrest in major oil exporter Nigeria.

New York's benchmark light sweet crude contract for May delivery advanced 88 cents to $US31.04 a barrel.

The price of reference Brent North Sea crude oil for May delivery rose 81 cents to $US27.16 a barrel.

"The market is up on constant war talk. There is a pretty high level of concern," said AG Edwards market analyst Bill O'Grady.

But there had been no major attacks by Iraq on its neighbours, and no large terrorist attack, he added.

"It leads me to believe ... Gulf oil production is pretty safe right now," O'Grady said. "What the market is missing is that from the oil point of view there is really not a whole lot more risk."

The White House said it saw no evidence to date that the United States needed to tap its strategic petroleum reserve to offset supply disruptions stemming from the war against Iraq.

"There is no change in the status of the strategic petroleum reserve. It remains an issue that gets reviewed on a regular basis to determine whether or not a severe supply disruption has occurred," said spokesman Ari Fleischer.

"We have seen no evidence to date of a severe supply disruption, nevertheless the experts continue to monitor it," he told reporters.

Traders were trying to sift through the reams of war news to work out how the campaign in Iraq was really progressing, said GNI trader Robert Laughlin in London.

"The interest is very much . . . in terms of the propaganda machine over the weekend, as the Americans still say the war effort is being successful despite the fact there appears to be a mini-ceasefire," he said.

Ethnic unrest in Nigeria, which has reduced the country's oil exports by more than a third, was further fuelling concern, analysts said.

Political thugs attacked an opposition rally in Nigeria's troubled Niger Delta at the weekend, driving activists into a river and hacking them with machetes, an eye-witness said in Lagos.

Nigeria is due to go to the polls for general elections on April 12 and for presidential and state gubernatorial votes on April 19, the first test of the country's fragile democracy since the 1999 return of civil rule.

Over the past two weeks a violent uprising by ethnic Ijaw militants in the western Delta, south and west of the city of Warri, has led to scores of killings and crippled the region's oil industry.

"The market is up because people are still worried about the situation in Nigeria, where there was more violence over the weekend," said Deutsche Bank analyst Adam Sieminski in London.

"It means that the 800,000 barrels a day of production that was lost last week is still out, in contrast to statements on Friday and Saturday suggesting that a compromise between ethnic groups and the government had been reached," he added.

For the moment, there were few real concerns about supplies, but more bad news could send prices soaring, Sieminski said.

"There is still enough oil coming from Saudi Arabia and even Venezuela to keep the market supplied, but with Iraq out and the conflict in Nigeria still continuing, the market is tightly balanced, and if anything else should go on, we would see higher prices," he said.

<a href=asia.reuters.com>Reuters Tue April 1, 2003 06:37 AM ET By Sujata Rao

LONDON (Reuters) - World oil prices eased on Tuesday after the cancellation of a general strike in Nigeria raised hopes that output shut in the West African producer by ethnic clashes might soon return.

London benchmark Brent futures by 6:20 a.m. EST fell 55 cents to 26.73 a barrel and U.S. light crude dipped 83 cents to $30.21. Prices eased after Nigeria's biggest union called off a three-day strike originally scheduled to begin on Tuesday.

"News of the agreement on the Nigerian strike has given the market some breathing room," one London oil trader said.

While the war in Iraq and continuing ethnic unrest in Nigeria's oil producing regions prevented a steeper price fall, dealers feared a strike would further deepen the crisis in the world's eighth largest oil exporter.

Tribal clashes have shut nearly 40 percent of Nigeria's 2.2 million barrels per day of crude production for more than a week.

Nigerian and Iraqi jitters have helped support oil prices in recent days after the market lost a quarter of its value in the approach to the start of the war when dealers took the view that the war would not last long.

War worries have been countered by world supplies sufficient to meet lower seasonal demand in the second quarter.

"What's driving prices right now is the offset between supply security fears, balanced against expectations of softer demand, which you normally get at this time of the year," said Kevin Norrish, energy analyst at Barclays Capital.

While the war has put a halt to Iraq's 1.8 million bpd of crude exports, OPEC has compensated with increased supplies, with U.S. ally Saudi Arabia in March hitting its highest production level for 21 years

"As far as the war is concerned, we have lost Iraqi supplies but clearly OPEC is still managing so far to make up for that," Barclay's Norrish said.

Global energy demand on the 77 million bpd world market normally drops about two million bpd in the second quarter with warmer weather sets in the United States and Europe.

Demand then picks up again when gasoline consumption for motorists rises in the summer holidays.

Nigeria's high-quality sweet crude is being missed because it is a popular feedstock among U.S. refiners.

Gasline stocks in the United States, are running at a deficit to year-ago levels as the world's biggest consumer of motor fuel gears up for peak demand.

"Looking at where U.S. gasoline inventories are and where prices are, lots will depend now on how soon Venezuela will get its gasoline production back to normal," Norrish said.

Venezuela, struggling to get production back on stream after a crippling opposition strike has said it will restart gasoline exports this week to the United States and expects all refining and exports to return to normal in four to six weeks.

The strike had contributed to extremely tight oil inventories in the West even before the war in Iraq.

Analysts polled by Reuters predict that U.S. data due on Wednesday will show a large crude stock rise after a week of heavy imports.

"If you don't know where you're going, when you get there you'll be lost." -Yogi Berra

Reuters, 04.01.03, 5:53 AM ET

LONDON, April 1 (Reuters) - Loss of oil supplies from war-torn Iraq and Nigeria, where bloody clashes have choked off some production, will keep prices bubbling at close to $30 a barrel over the coming weeks, analysts and traders predict. They say there is enough supply heading into international markets to prevent a spike back to the $39.99 for U.S. light crude touched briefly in the run-up to the war. Many Brent traders are targeting a $28-$30 price band for the near future, with U.S. light crude valued at a $3 premium. "It's very unlikely we'll go right back up," said Tony Machacek of brokerage Prudential Bache. The price spike ahead of the war was partly driven by concerns that Iraqi soldiers might set fire to oil wells but an early capture of the wells by U.S.-led forces minimised this. "What we can see from the action so far is that they seem to have covered most of the southern oilfields quite well," added Machacek. Most analysts and traders agreed an 11-day sell-off that pushed Brent down to a low of $24.00 and U.S. light sweet crude to $26.30 on March 21, the day after war began, was too extreme. They also said a subsequent rebound was based on the closing in of 37 percent of Nigeria's 2.2 million barrels per day (bpd) of production because of clashes between tribal groups in the Niger Delta.

DRIVING SEASON LOOMS Nigerian low-sulphur crude is a particularly valuable commodity ahead of the U.S. driving season because it yields large quantities of gasoline. The U.S. gasoline market consumes more than 12 percent of all world oil. Fears U.S. gasoline supplies will run short during peak demand, pushing up prices of gasoline and in turn crude, were stoked by inventory data last week showing a one-percent fall in U.S. gasoline stocks when they should have been rising. "Inventories need to start climbing very sharply to give any chance of avoiding a huge spike in gasoline prices," said J.P. Morgan's Paul Horsnell in a research note.

From correspondents in New York 01apr03

OIL prices gushed higher overnight, fuelled by fears of a bloody, drawn-out war in Iraq and fresh reports of unrest in major oil exporter Nigeria.

New York's benchmark light sweet crude contract for May delivery advanced 88 cents to $US31.04 a barrel.

The price of reference Brent North Sea crude oil for May delivery rose 81 cents to $US27.16 a barrel.

"The market is up on constant war talk. There is a pretty high level of concern," said AG Edwards market analyst Bill O'Grady.

But there had been no major attacks by Iraq on its neighbours, and no large terrorist attack, he added.

"It leads me to believe ... Gulf oil production is pretty safe right now," O'Grady said. "What the market is missing is that from the oil point of view there is really not a whole lot more risk."

The White House said it saw no evidence to date that the United States needed to tap its strategic petroleum reserve to offset supply disruptions stemming from the war against Iraq.

"There is no change in the status of the strategic petroleum reserve. It remains an issue that gets reviewed on a regular basis to determine whether or not a severe supply disruption has occurred," said spokesman Ari Fleischer.

"We have seen no evidence to date of a severe supply disruption, nevertheless the experts continue to monitor it," he told reporters.

Traders were trying to sift through the reams of war news to work out how the campaign in Iraq was really progressing, said GNI trader Robert Laughlin in London.

"The interest is very much . . . in terms of the propaganda machine over the weekend, as the Americans still say the war effort is being successful despite the fact there appears to be a mini-ceasefire," he said.

Ethnic unrest in Nigeria, which has reduced the country's oil exports by more than a third, was further fuelling concern, analysts said.

Political thugs attacked an opposition rally in Nigeria's troubled Niger Delta at the weekend, driving activists into a river and hacking them with machetes, an eye-witness said in Lagos.

Nigeria is due to go to the polls for general elections on April 12 and for presidential and state gubernatorial votes on April 19, the first test of the country's fragile democracy since the 1999 return of civil rule.

Over the past two weeks a violent uprising by ethnic Ijaw militants in the western Delta, south and west of the city of Warri, has led to scores of killings and crippled the region's oil industry.

"The market is up because people are still worried about the situation in Nigeria, where there was more violence over the weekend," said Deutsche Bank analyst Adam Sieminski in London.

"It means that the 800,000 barrels a day of production that was lost last week is still out, in contrast to statements on Friday and Saturday suggesting that a compromise between ethnic groups and the government had been reached," he added.

For the moment, there were few real concerns about supplies, but more bad news could send prices soaring, Sieminski said.

"There is still enough oil coming from Saudi Arabia and even Venezuela to keep the market supplied, but with Iraq out and the conflict in Nigeria still continuing, the market is tightly balanced, and if anything else should go on, we would see higher prices," he said.