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

HOUSTON, Mar. 24 -- Energy futures prices continued to plummet Friday, with confident traders selling off long positions on reports that US-led forces had secured oil fields in Iraq. But oil prices rebounded early Monday in the London market, with news that Iraqi troops mounted a strong resistance to Allied troops over the weekend.

A press conference planned Monday in one captured Iraqi oil field was canceled by the US military because of danger from Iraqi forces.

"Not nearly safe" Reuters news service reported Monday that fighting had driven out civilian well control specialists who had been brought in to extinguish well fires in Iraq's Rumaila field. Reuters quoted Brian Krause, vice-president and senior well control specialist for Houston-based Boots & Coots International Well Control Inc. as saying: "It's not nearly as safe as they said it was. We're kind of sitting ducks out there."

British military sources earlier reported almost all Iraqi oil facilities were mined or booby-trapped.

In its daily internet update, the US Energy Information Administration reported, "The US military has stepped up security in the vicinity of the Rumaila oilfield on Monday after reports of armed Iraqis in the vicinity, but a US military spokesman stressed that 'they won't be able to destroy the wells.'"

EIA said all Iraqi oil exports have halted, "with the last ship having loaded oil from storage tanks at Turkey's port of Ceyhan last Thursday. With the departure of (United Nations) staff from Iraq, the UN oil-for-(aid) program is effectively on hold. Also, no oil is leaving Iraq's Persian Gulf port of Mina al-Bakr. Most of the oil production and pipeline infrastructure in the south is now under coalition control. A small number of oil well fires have been confirmed, but overall damage appears to have been minimal."

Market "too complacent" In a strongly worded report Monday, Paul Horsnell, head energy analyst for J.P. Morgan Securities Inc. in London, charged, "The oil market has become too complacent about the war, its risks, and the risks of the postwar situation."

He said, "Oil markets fell Friday on unconfirmed (and since then unrepeated) reports that US Special Forces have secured Kirkuk oil field (in northern Iraq). Given the sheer size of Kirkuk field, we do not find it credible that all the Kirkuk wells could possibly be secure."

More important, Horsnell said, "The world oil industry is currently running very short in terms of discretionary inventory cover. In the US in particular, crude oil inventories (are) running close to minimum operating levels." At the same time, he said, "The US is now entering a period in which crude oil runs rise seasonally."

Horsnell said, "In all, the system needs an oil surplus to, first, stop the current inventory falls, more surplus to meet the increase in refinery runs, and then even more surplus to provide some cushion away from the rocks of low inventory cover."

World markets are depending on the other 10 members of the Organization of Petroleum Exporting Countries—particularly Saudi Arabia—to make up any shortfalls in oil supplies resulting from the war in Iraq.

However, Horsnell noted, the recent drop in oil prices "has already taken prices to precisely where Saudi Arabia wants them, i.e., within the OPEC target band. Further, some traders seem to be seriously thinking that they could attempt to push prices below the bottom of the target band, i.e., precisely where Saudi Arabia does not want them."

Under those circumstances, Horsnell said, "We would not expect very many of the Saudi barrels in inventory to actually make it to market, and in addition we would expect the level of Saudi production to be scaled back significantly."

Nigerian crisis Meanwhile, the OPEC news agency reported Monday that Nigeria's oil industry "is facing its worst crisis in recent times as a result of an escalation of political violence in the Warri area and other parts of the Niger Delta region."

Chevron Nigeria Ltd., a subsidiary of ChevronTexaco Inc., said Sunday it was forced to shut in 440,000 b/d of its total Nigerian production of 450,000 b/d. The company last week declared force majeure after shutting in 140,000 b/d. The Royal Dutch/Shell Group and TotalFinaElf SA also have been forced to shut in production, jumping the total amount of disrupted Nigerian production to 600,000-800,000 b/d, EIA reported Monday.

Several sources reported Ijaw tribal fighters have taken over many of the production and infrastructure facilities in the Bayelsa state.

"In the words of one of their leaders, 'We'll blow up these flow stations and blast the pipelines. We will take Nigeria 20 years backward.'" Horsnell reported. "Nigeria seems to be doing a pretty good job at going many years backward already, but the Ijaw threat appears to be a serious one."

Chávez blasts Allied "aggression" In his weekly radio program Sunday, Venezuelan President Hugo Chávez said his country "joins the peoples of the world and the majority of governments of the world that reject the aggression against the people of Iraq." He urged UN Secretary Gen. Kofi Annan "to speak out and reject the aggression against the people of Iraq. That cannot be tolerated."

A founder and charter member of OPEC, Venezuela was one of the nearest and, before the recent general strike, largest suppliers of oil to the US market. Government officials claim the country has restored its oil production to more than 3 million b/d, but former Petroleos de Venezuela SA officials claim current production is actually 2.4 million b/d.

At any rate, Venezuelan Energy Minister Rafael Ramirez said over the weekend that his country and other OPEC members are not planning to increase oil production.

Ramirez denied "rumors" that OPEC had authorized members to increase production to maximum capacity to offset lost production from Iraq and other sources. "At the last conference of OPEC ministers, held in Vienna, it was agreed not to increase the production ceiling—that is to say that there would be no oil production increases, and maintain the limit of 24.5 million b/d, (excluding Iraq)," he said.

Market prices The May contract for North Sea Brent oil lost $1.15 to $24.35/bbl Friday on the International Petroleum Exchange in London, with prices falling near the close of trade on expectations of a short, successful war in Iraq. However, that contract was trading at $25.55/bbl early Monday on IPE, up $1.25 from Friday's close, on new evidence that the war may not be over as swiftly as anticipated. The April natural gas contract lost 2.2¢ to the equivalent of $2.73/Mcf Friday on IPE.

The new near-month May contract for benchmark US light, sweet crudes fell by $1.21 to $26.91/bbl Friday on the New York Mercantile Exchange. The June contract was down $1.09 to $26.18/bbl. Heating oil for April delivery plunged 6.88¢ to 75.56¢/gal. Unleaded gasoline for the same month dropped 5.74¢ to 85.25¢/gal.

The April natural gas contract lost 17.8¢ to $5.13/Mcf Friday on NYMEX. It was "undermined by a soft physical market and further weakness in crude oil futures despite long-term concerns about record low inventories," said analysts at Enerfax Daily.

The average price for OPEC's basket of seven benchmark crudes fell by $1.70 to $24.81/bbl Friday.

For the entire week, however, the OPEC basket price averaged $28.42/bbl, down $4.30/bbl from the previous week's average.

So far this year, the OPEC basket price has averaged $30.99/bbl, up from $24.36/bbl for all of 2002.

Contact Sam Fletcher at samf@ogjonline.com

Source Monday March 24, 2:36 PM By Irene Kwek Of DOW JONES NEWSWIRES

SINGAPORE (Dow Jones)--Oil prices strengthened early Monday in Asia, boosted by concern among market participants that the Iraq war might go on longer than many had initially envisaged.

Crude futures on the New York Mercantile Exchange spiked as much as 79 cents a barrel, or 2.9%, to $27.70/bbl in the first minutes of the after-hours Access session, reversing most of the losses from Friday's floor trade.

"People think the war is going to take longer, and (the coalition forces) will face more resistance than expected," a U.S.-based broker said.

The gains in crude futures helped lift the rest of the petroleum complex, with May gasoline futures posting a 1.43-cent gain to 85.90 cents/gallon at 0635 GMT. April heating oil was up 1.65 cents to 77.21 cents/gallon.

At 0635 GMT, Nymex May crude was at $27.42/bbl, shedding some of its gains early in the session.

Nymex May crude futures plummeted to a three-month low at the close of floor trade Friday as coalition forces secured Iraq's Southern oil fields, helping to support market perception that the war in Iraq would see a quick end.

But reports over the weekend that coalition forces were facing fierce resistance in their push to Baghdad led market participants to start factoring in the possibility that the war in Iraq could be a long drawn-out affair.

"There's another chance we could see another oil price spike because in the past few days the futures were oversold on speculation that it would be a quick war," said Gordon Kwan, HSBC's oil and gas analyst.

"But today's military action appears to suggest otherwise, that this will be longer than expected. The deteriorating situation in Nigeria, Venezuela's production is still off-peak, and some production was lost in Iraq and Kuwait...We can see oil prices bouncing back," he said.

"Oil prices could retest $30/bbl again this week unless the military operations were extremely smooth going into Baghdad, but it appears to be more difficult than we have witnessed so far," he said.

Stiff Resistance

U.S. and U.K. officials late Sunday said specially trained paramilitary guerrillas and Saddam Hussein's security forces were leading the stiffest resistance to the U.S.-led invasion, trying to keep Iraqi soldiers from surrendering and organizing battlefield tricks that have inflicted casualties.

Members of the Fedayeen Saddam are suspected of having organized battlefield ruses using civilian clothes and cars and fake surrenders of Iraqi soldiers that drew in U.S. forces to be attacked in places like An Nasiriyah and Umm Qasr, the officials said.

The Fedayeen are elite inner-circle soldiers totaling about 15,000 that report directly to one of Saddam's sons.

Other difficulties included Iraq's capture of a handful of U.S. soldiers, the accidental downing of a U.K. aircraft by a U.S. missile, and a grenade attack on forces in Kuwait blamed on a Muslim U.S. soldier.

U.S. President George W. Bush and U.S. military officials said the Iraqi regime ultimately will fall, but warned of tougher fighting to come as U.S.-led forces advance on Baghdad.

Bush said Sunday that Iraq's Southern oil fields were secure and that most of the South was in allied hands, though there were pockets of resistance. British forces were holding the area, and experts were being brought in to fight the 10 or so well fires, U.S. Defense Secretary Donald Rumsfeld said Sunday.

However, coalition forces still hadn't secured the country's rich oil fields in the North.

In other developments, ChevronTexaco Corp. (CVX) shut down 440,000 barrels a day of oil production in the western Niger Delta in Nigeria due to ethnic violence. Royal Dutch/Shell Group (RD) and TotalFinaElf (TOT) have also shut in some production there, leaving 28% of the country's 2.2 million barrels a day in output off line.

More Than Ample Supply?

Despite the disruption of Iraqi oil exports due to the war, Societe Generale raised the possibility of a major surplus in the second quarter that will be difficult for the Organization of Petroleum Exporting Countries to manage.

SG noted in a research report distributed Monday that a combination of lower seasonal demand in the second quarter, a possible release of U.S. strategic reserves, and increased oil production, all mean that there are sufficient alternative sources of oil to make up for the disruption of Iraqi exports.

Since the start of the year, OPEC output, excluding Iraq, has increased by more than 3 million b/d, thanks to the return of Venezuelan oil exports and an increase in output by Saudi Arabia and other OPEC countries with spare capacity, it noted.

Looking ahead, the challenge facing OPEC will be to react promptly after the war ends to prevent oil prices from collapsing, SG said.

"Yet it is precisely because we believe that OPEC will be unable to show the same responsiveness as in the past that we are more bearish than the market consensus for the second quarter," SG said.

-By Irene Kwek, Dow Jones Newswires; 65-6415-4062; irene.kwek@dowjones.com

-Edited by Nick vonKlock

Full story.. Reuters, 03.23.03, 11:34 PM ET

SINGAPORE, March 24 (Reuters) - Oil prices rose on Monday after hitting four-month lows as optimism for a quick Iraqi war waivered with news U.S.-led forces were meeting resistance on the road to Baghdad.

As bombs pounded the Iraqi capital for a fifth day, crucial Gulf crude exports flowed uninterrupted. Brokers said the market was volatile and prices were being driven by headline news.

U.S. light crude jumped almost 80 cents to $27.70 a barrel before easing by 0424 GMT to $27.35, up 44 cents on the day. London's Brent crude was up 35 cents at $24.70 a barrel.

"The oil market has been behaving as if peace has broken out but the level of Iraqi resistance so far suggests the war could drag on with consequences for oil prices," said Adam Sieminski, oil analyst at Deutsche Bank.

Prices dropped to four-month lows on Friday, taking crude's losses to 30 percent in a week as optimism grew that the war would be swift with little damage to Iraq's oil infrastructure and no disruption to oil supplies from the Gulf producers, which pump about 40 percent of world exports.

But over the weekend, Iraq paraded U.S. prisoners of war on television and inflicted its heaviest casualties so far on the invaders as resistance to the U.S.-led forces stiffened the closer they drew to Baghdad.

"Prices are very volatile and that volatility will continue. Until some kind of clarity emerges it will be difficult to get stability," said Yasser Elguindi of Medley Global Advisers in New York.

SOUTHERN OILFIELDS SECURE

U.S. and British forces tightened their grip at the weekend on Iraq's southern oilfields and key exporting terminals and began to assess how to restart exports.

Iraq was ranked seventh among crude exporters before the war, exporting about 1.8 million barrels per day (bpd), under U.N. supervision, from output of 2.5 million bpd.

The southern Rumaila oilfields can pump up to 900,000 bpd. The northern oil hub of Kirkuk has yet to be secured by U.S. and British forces.

Fears Iraqi soldiers might repeat the sort of damage to oil wells seen in their retreat from Kuwait in 1991 have so far proven unfounded. The U.S. has estimated that fewer than 10 Rumaila wellheads have been sabotaged.

"There could still be some issues in the north or a counter-attack in the south, but the worst case scenarios, such as torching the oilfields, are not playing out," said Raad Alkadiri of PFC Energy in Washington.

OPEC exporters, especially Saudi Arabia, have hiked output in the past few months to cover the loss of exports from strike-hit Venezuela and to cool high prices fuelled by war fears.

Demand for oil normally drops in the second quarter of the year at the end of the northern hemisphere winter.

Tribal warfare in OPEC member Nigeria has shut down about 29 percent, or a little more than 570,000 bpd, of the African country's output, offering further support for prices.

Price hawks in OPEC are already concerned about the slump in oil, which had been close to $40 late in February. The price dive has revealed deep splits in the 11-member Organisation of the Petroleum Exporting Countries.

OPEC Secretary-General Alvaro Silva said on Thursday members had been authorized to use spare output capacity if necessary to make up a shortfall in Iraqi supply.

But an adviser to Iran's oil ministry, Hossein Kazempour Ardebili, said any output hike would be a "violation" since no decision had been taken to raise OPEC quota limits.

Saudi Arabia, the world's top exporter and a key U.S. ally, is pumping more than a million bpd above its quota of eight million bpd, according to independent estimates.

Read source

Hotels and restaurants should brace themselves for sharp rises in their fuel bills, as both domestic and global events have made the markets for oil, gas and electricity "unstable and volatile".

Chris Arnold, senior purchasing executive for Best Western buying consortium Beacon, warned that the crisis in Iraq, the labour strike in Venezuela and the poor performance of the FTSE could all drive fuel prices higher.

"They all lead to a perceived nervousness that there could be a shortage of supply in the market, and the risk of a supply shortage drives prices up," he said.

Closer to home, consolidation in the UK utility market meant there were fewer players and therefore less competition to keep prices down.

Arnold said oil and natural gas prices had risen by 10% in the past few weeks. The price of gas, the most volatile fuel, almost doubled between 1999 and early 2002, at a time when hotels were suffering from the impact of the foot-and-mouth epidemic, the 11 September tragedy and widespread flooding.

"In 1999, prices were very stable and people did not feel the need to shop around," he added. "Now, they have to, in order to get the best rates."

Arnold said the demand for Beacon to use its buying power to negotiate utility rates for members has risen by 75% in the past year. Beacon currently buys for 320 Best Western hotel members, plus 2,000 other leisure firms including hotels, restaurants, golf clubs, nursing homes and pubs and clubs.

Beacon's utility consultant, Inenco, is advising members not to renew contracts until the war in Iraq is over, but to do so afterwards before prices climb any higher.

They should also consider fixing rates across two-year rather than one-year deals, to remove the risk and allow them to budget with more confidence - although they could lose out if prices did fall during the period.

24 March 2003

<a href=www.thestar.com>Irak, Nigeria, Venezuela Mar. 21, 2003. 08:58 AM

PARIS (AP) — The International Energy Agency said today it sees no reason to release emergency crude oil stocks despite the war in Iraq and civil unrest in Nigeria.

"There is no event in Iraq that makes us fear about a disruption in oil supply," agency spokesman Pierre Lefevre said, noting that the output concerned in Nigeria was not significant in terms of volume.

Thursday, soon after the U.S.-led troops launched an invasion of Iraq, the Paris-based energy watchdog said increased production from OPEC kingpin Saudi Arabia and key member Venezuela, combined with lower demand for heating oil in the United States, helped to reinforce confidence that demand would be met.

The agency has said it will allow the Organization of Petroleum Exporting Countries to have first crack at supplying customers before the IEA takes a decision to release stocks. OPEC has pledged to keep markets well supplied.

Iraq's oil exports through the United Nations' oil for food program, normally around 1.7 million barrels a day, are now virtually at a standstill following the withdrawal of UN staff from Iraq on Tuesday.

To date, ethnic clashes in the oil-rich Niger delta in Nigeria have disrupted more than 250,000 barrels a day of the OPEC member's two million barrels a day output.