AP Wire Posted on Thu, Mar. 27, 2003 BRAD FOSS Associated Press

NEW YORK - Oil prices rose above $30 a barrel Thursday for the first time since war broke out in Iraq, as concerns about worldwide supplies replaced early hopes for a quick end to the military conflict.

The price of oil on futures markets has risen nearly 13 percent since last Friday, when it dropped to a three-month low.

Traders, who expect the volatility to continue at least until the end of fighting in Iraq, have plenty to worry about:

_Commercial inventories of crude are extremely low in the United States at a time when refiners are cranking out gasoline for the summer driving season.

_Iraqi exports have ceased and supplies from Nigeria and Venezuela are down because of labor strife, taking more than 3 million barrels a day out of the world market.

_Finally, analysts said the extra petroleum being pumped by Saudi Arabia and other OPEC members to offset that shortfall hasn't entirely reached U.S. shores and might not be enough to calm markets when it does.

While these factors were in play as prices dropped last week, the stubborn fighting by Iraqi forces in recent days has convinced many oil - and military - analysts that a rapid conclusion to the battle is unlikely.

"Now, the market is recovering and trying to figure out where it should be," said Tom Bentz, a trader for BNP Paribas in New York. Bentz said prices are likely to vacillate between $26 and $31 a barrel as long as there is so much uncertainty.

At the upper end of that range, Bentz said, traders are likely to fret that there could be a reversal of fortunes if the extra supplies from Saudi Arabia were to arrive at U.S. ports at the same time that Nigeria resumes normal export levels of about 2.2 million barrels a day.

For now, oil traders are retreating from the view of ample supplies that emerged during the first 48 hours of the war.

Crude oil for May delivery rose $1.74 on Thursday to close at $30.37 a barrel on the New York Mercantile Exchange after trading as high as $30.45. Oil is up 13 percent from last Friday, when it closed at $26.91.

The nation's petroleum stocks rose by 3.7 million barrels last week to 273.9 million barrels, the Energy Department said Wednesday. However, that is still 17 percent below year-ago levels.

Mark Baxter, director of Southern Methodist University's Cox Maguire Energy Institute, said the extra crude supplied by certain members of the Organization of Petroleum Exporting Countries will not be enough to make up for what has been lost from others, including Iraq, Nigeria and Venezuela.

Baxter estimated that the global market would still come up short by 1 million barrels a day - an amount that could be made up, he pointed out, by tapping the nation's Strategic Petroleum Reserve, a stockpile that contains 599 million barrels.

John Felmy, chief economist at the American Petroleum Institute, a Washington-based trade group, said he was confident that OPEC can keep the world adequately supplied.

"It's quite possible that (the extra OPEC barrels) are hitting the shores now," Felmy said.

The reason U.S. oil inventories aren't growing more substantially, he said, is because "we are running a lot of it through refineries to meet the summer gasoline demand."

Wednesday March 26, 5:29 AM

By Anthony Harrup Of DOW JONES NEWSWIRES

MEXICO CITY (Dow Jones)--High oil prices and crude export volumes not seen in more than four years gave Mexico a trade surplus in February, its first since mid-1997.

But not all was rosy in the trade numbers, which also pointed to a drag on investment and continued weakness in the economy.

The Finance Ministry reported Monday that the country registered a trade surplus of $65 million in February, aided by a 110% year-on-year jump in petroleum exports to $1.66 billion.

That included $1.47 billion from crude oil exports, slightly below the $1.55 billion earned in January, which had more days.

Oil prices soared in the lead-up to the war on Iraq, aided also by a strike earlier this year in Venezuela that reduced the South American country's output to a trickle.

As a result, Mexico earned nearly $28 a barrel for its mostly heavy crude in the first two month of the year, while ratching up export volume to 1.79 million barrels a day in January and 1.88 million b/d in February.

State oil monopoly Petroleos Mexicanos (E.PEM), or Pemex, has had its taps on full as Mexico takes advantage of the virtual suspension in the global supply agreements it helped to implement in April 1998, along with the Organization of Petroleum Exporting Countries and other independent producers.

February marked the first time since late 1998 that Pemex's exports exceeded 1.8 million b/d, and it was the highest monthly average since March of that year, when exports averaged 1.93 million b/d.

Cashing In On Commodities

Higher oil prices, though, could represent a double-edged sword for Mexico and some of its southern neighbors.

"Latin America usually does well during periods of global conflict," wrote Walter Molano of Connecticut-based BCP Securities in a a report Tuesday.

"Of course, higher commodity prices mean better export earnings for the region. There is one caveat. A very prolonged war, with serious disruptions in oil production could have an adverse impact on Latin America," Molano added.

Bank of Mexico Governor Guillermo Ortiz and Finance Minister Francisco Gil noted the flip side to higher oil prices when they gave a news conference last week at the start of the war.

Destruction of oilfields in the Middle East or other supply disruptions could push the price too high, choking economic recovery with a corresponding negative effect on the Mexican economy, Gil said.

In the meantime, the extra oil income will allow the federal government to keep states happy with additional budget transfers, without threatening the fiscal deficit target of 0.5% of GDP.

Silver Lining Has A Cloud

While notable because of the surplus, February's trade numbers weren't all good news. They suggested that economic activity remains weak, and that little has been gained from a depreciating peso, which at MXN10.94 to the dollar in February was 17% weaker than in the year-ago month.

The decline in exports from the export-focused maquiladora manufacturing sector points to continued weakness in the U.S. economy, said Mario Correa, an economist at Scotiabank Inverlat. The U.S. absorbed 89% of Mexico's $161 billion in exports last year.

At the same time, the 14.5% drop in capital goods imports suggests weak investment, or even a contraction, Correa added.

And with consumer imports up 11.5% in February, "I don't see any important effect of the exchange rate on trade," Correa added.

Mexico's external accounts remain in good shape, given that the current account deficit was a modest 2.2% of gross domestic product in 2002 and the government projects only a slight increase, to 2.8% of GDP, for this year.

Still, the message behind the recent trade numbers is one of weak investment and a sluggish U.S. economy, said Correa.

-By Anthony Harrup, Dow Jones Newswires; (5255) 5080-3450, anthony.harrup@dowjones.com

<a href=asia.reuters.com>Reuters Tue March 25, 2003 02:23 PM ET

NEW YORK (Reuters) - World oil prices fell back on Tuesday as British television networks said there were reports of an uprising against President Saddam Hussein in Iraq's second city of Basra.

U.S. light crude CLc1 fell 51 cents to $28.15 a barrel after a $1.75 jump on Monday. London Brent crude LCOc1 dropped $1.04 a barrel to $25.05.

Military officials said they knew nothing about any revolt in Basra but the British military said they would do everything possible to encourage and support any Iraqis trying to overthrow forces loyal to Saddam.

The reports reversed early gains made as Iraqi forces resisted a U.S. military thrust toward Baghdad while tribal violence in Nigeria kept nearly 40 percent of the country's crude output shut.

U.S. and British forces faced tough resistance from Iraqi fighters as they opened an assault on Republican Guards defending approaches to Baghdad in a campaign aimed to oust Iraqi President Saddam Hussein.

Oil fell 25 percent last week as traders bet on a short war with little damage to Iraq's oil industry. Before the conflict, Iraq exported about 1.7 million barrels per day (bpd) to the 77 million bpd world market.

But confidence in a quick war waned after the weekend as U.S. and British forces suffered casualties and saw slower progress.

"While there are few who doubt the outcome of the conflict in Iraq, given the technological superiority of coalition forces, Iraq's oil infrastructure escaping damage is not as certain," said John Kilduff of Fimat bank in a report.

Meanwhile a series of bloody clashes in Nigeria forced closure at the weekend of just over 800,000 bpd of the 2.2 million bpd produced by Western oil firms in the West African OPEC nation.

Ethnic groups in the oil-rich Niger Delta have said they were battling for a greater share of the country's oil wealth.

Nigeria is one of the top six oil exporters to the United States, where fuel supplies have been running at 27-year lows partly due to an oil workers' strike in Venezuela.

Nigeria, which averaged 560,000 bpd to U.S. refiners last year, where its crude is valued for its high gasoline content, also exports to Europe and Asia.

"Nigerian crude is not the kind of stuff you want to be short of," said Paul Horsnell, oil analyst at J.P. Morgan. "It's very serious. It's not a little local disturbance."

The Organisation of Petroleum Exporting Countries said on Monday it could make up any shortfall in supply from Nigeria, OPEC's fifth largest producer.

The group has also pledged to make up for the disruption to Iraqi exports but now has only the slimmest of spare capacity cushions.

<a href=ogj.pennnet.com>Oil & Gas Journal Sam Fletcher Senior Writer

HOUSTON, Mar. 25 -- Energy futures prices rebounded Monday, reversing last week's downward trend amid new indications that the war in Iraq likely will take longer and be more costly than traders originally anticipated.

The US stock market, which had been on an upswing since the start of hostilities, was adversely affected by new developments in that war.

Nigerian production falls "Following a 23% decline last week primarily driven by what was hoped to be a quick war in Iraq, crude oil prices have moved higher early this week, fueled by increased resistance by Iraqi troops and escalating political unrest in Nigeria," said analysts Tuesday at Jefferies & Co. Inc. in New York. "Over the past few days, approximately 835,000 b/d, or 38% of Nigeria's crude oil production, has been shut down due to political unrest," they reported.

At its previous capacity of 2.18 million b/d, Nigeria was the third largest active producer in the Organization of Petroleum Exporting Countries and the fifth largest exporter of oil to US markets.

Therefore, analysts said, "At a time when Iraq exports have been shut down, Venezuela is pushing to boost production back toward pre-strike levels, and OPEC is nearing its capacity, Nigeria's problems are of high concern. The positive is that we are entering the seasonally weak demand period; worldwide oil demand is expected to decline about 1.6 million b/d in the second quarter vs. the first quarter."

Current problems in Iraq, Venezuela, and Nigeria "highlight the risks behind US reliance on unfriendly and unstable countries for our crude oil needs," analysts said. "Although the US would remain dependent on oil imports, it would seem logical that the US government pushes—perhaps through royalty relief or opening up environmentally sensitive areas—to increase domestic production."

Tanker traffic PetroLogistics—the European think tank that monitors oil tanker traffic—estimated Tuesday that production among the 10 active OPEC members increased by 780,000 b/d to 26.08 million b/d in March from its revised February estimate. However, it said that increase was more than offset by the decline in Iraq's estimated production to 1.45 million b/d in March, from 2.6 million b/d earlier.

Since the start of the war, Iraq's oil exports have halted. London-based Tankerworld reported through its website Tuesday that tanker activity in the Mediterranean has declined as a result. However, it said tanker traffic is increasing in the Caribbean as Venezuela's exports pick up volume after the protracted strike.

Another industry source Tuesday told OGJ online that "a handful of US and European shipping firms are now loading crude and products" for export from Venezuela, although many of those shipments still are limited to vessels owned and operated by Petroleos de Venezuela SA. "Accurate and credible information on what's going on inside the poststrike Venezuelan oil industry is really hard to obtain," the source said. However, he said, loadings of oil and petroleum products for export remain "considerably lower" than before the strike.

Meanwhile, insurance rates for tankers operating in the Persian Gulf were reported "jumping all over the place" Tuesday, following the discovery of explosive mines in those waterways.

Market prices The May contract for benchmark US sweet, light crudes rebounded by $1.75 to $28.66/bbl Monday on the New York Mercantile Exchange, while the June position advanced by $1.36 to $27.54/bbl. Unleaded gasoline for April delivery jumped by 4.54¢ to 89.79¢/gal. Heating oil for the same month rose 2.81¢ to 78.37¢/gal.

The April natural gas contract gained 12.5¢ to $5.25/Mcf Monday on NYMEX. That market was "moving upward with crude oil prices amid cooler late-week weather forecasts that could increase demand," said analysts Tuesday at Enerfax Daily. "Look for the natural gas market to head back toward mid-range, continuing a consolidation pattern in a sideways market over the short-term," they advised. "A dip below $5.08(/Mcf) could take the market down in a big move. Prices have fallen 45% since late February, reflecting moderating temperatures and the coming of spring weather."

In London, the May contract for North Sea Brent oil climbed by $1.74 to $26.09/bbl Monday on the International Petroleum Exchange. However, the April natural gas contract lost 3.4¢ to the equivalent of $2.72/Mcf on IPE.

The average price for OPEC's basket of seven benchmark crudes increased by 89¢ Monday to $25.70/bbl.

Contact Sam Fletcher at samf@ogjonline.com

<a href=asia.reuters.com>Reuters Tue March 25, 2003 01:24 PM ET

NEW YORK (Reuters) - World oil prices extended gains on Tuesday as Iraqi forces resisted a U.S. military thrust toward Baghdad while tribal violence in Nigeria kept nearly 40 percent of the country's crude output shut.

U.S. light crude CLc1 gained 67 cents to $29.33 a barrel after a $1.75 jump on Monday. London Brent crude LCOc1 added 11 cents to $26.20 a barrel.

U.S. and British forces faced tough resistance from Iraqi fighters as they opened an assault on Republican Guards defending approaches to Baghdad in a campaign aimed to oust Iraqi President Saddam Hussein.

Oil fell 25 percent last week as traders bet on a short war with little damage to Iraq's oil industry. Before the conflict, Iraq exported about 1.7 million barrels per day (bpd) to the 77 million bpd world market.

But confidence in a quick war waned after the weekend as U.S. and British forces suffered casualties and saw slower progress.

"While there are few who doubt the outcome of the conflict in Iraq, given the technological superiority of coalition forces, Iraq's oil infrastructure escaping damage is not as certain," said John Kilduff of Fimat bank in a report.

Oil's gains lost some steam on unconfirmed reports of a popular uprising against troops loyal to Saddam Hussein in Iraq's second largest city, Basra.

Meanwhile, a series of bloody clashes in Nigeria forced closure at the weekend of just over 800,000 bpd of the 2.2 million bpd produced by Western oil firms in the West African OPEC nation.

Ethnic groups in the oil-rich Niger Delta have said they were battling for a greater share of the country's oil wealth.

Nigeria is one of the top six oil exporters to the United States, where fuel supplies have been running at 27-year lows partly due to an oil workers' strike in Venezuela.

Nigeria, which averaged 560,000 bpd to U.S. refiners last year, where its crude is valued for its high gasoline content, also exports to Europe and Asia.

"Nigerian crude is not the kind of stuff you want to be short of," said Paul Horsnell, oil analyst at J.P. Morgan. "It's very serious. It's not a little local disturbance."

The Organization of the Petroleum Exporting Countries said on Monday it could make up any shortfall in supply from Nigeria, OPEC's fifth largest producer.

The group has also pledged to make up for the disruption to Iraqi exports but now has only the slimmest of spare capacity cushions.