www.wilmingtonstar.com Last changed: March 09. 2003 4:11PM By BRUCE STANLEY AP Business Writer

Whatever OPEC decides to do this week, its representatives won't have their usual influence on oil prices when they meet to review the group's output quotas for crude, analysts say. Members of the Organization of Petroleum Exporting Countries are already pumping at or near their full production capacity, as worsening fears of a U.S.-led war on Iraq have pushed prices to 12-year highs. A conflict would almost certainly cut off Iraq's crude exports, currently totaling about 2 million barrels a day. With Venezuela's oil exports still recovering from a strike, OPEC would be hard-pressed also to cover a shortfall in Iraqi shipments. "That's one of the reasons now why the market is so incredibly nervous," said Orrin Middleton, an energy analyst at Barclays Capital. "The real problem is how much can OPEC really do?" OPEC supplies about a third of the world's oil, but some analysts estimate it has only 1.4 million barrels a day in readily available spare capacity. The United States and other large importing countries are now coordinating plans to tap into their strategic petroleum reserves as the ultimate cushion against a major supply disruption, should fighting erupt in Iraq. OPEC, whose delegates meet on Tuesday in Vienna, Austria, can help by suspending its formal production quotas and producing flat out. But at the moment, analysts say international politics has robbed the cartel of much of its influence. "For once OPEC is in the back seat, looking out the window. The U.S. is in the front seat, driving the war wagon," said Leo Drollas, chief economist at the Center for Global Energy Studies. When OPEC oil ministers last met two months ago, they decided to increase the group's production target by 6.5 percent to 24.5 million barrels a day, in the hope of keeping prices at or below $28 a barrel. Prices have climbed steadily since then. On Feb. 27, futures contracts of U.S. light, sweet crude spiked to a post-Gulf War high of $39.99 a barrel in New York. April contracts of U.S. crude were trading Friday at $37.30 a barrel, while Brent futures for April delivery were at $33.75 in London. OPEC's members are cashing in on these high prices by pumping well above their official quotas. In February, the group's 10 members excluding Iraq produced 24.7 million barrels a day, according to a Dow Jones Newswires survey. Iraq doesn't participate in OPEC's production agreements because the United Nations oversees its exports. Energy Secretary Spencer Abraham and Claude Mandil, executive director of the International Energy Agency, expressed gratitude Friday for OPEC's willingness to bust its own quotas. The agency is the energy watchdog for the Organization for Economic Cooperation and Development, a club of rich oil-importing nations. "The U.S. government and IEA appreciate the actions of producer nations, which have already increased production to mitigate the effects of the Venezuelan disruption," Abraham and Mandil said in a joint communique issued at the agency's headquarters in Paris. "In light of tight markets, we also appreciate producers' willingness to increase production if necessary to address any further supply disruption." Mandil has consulted recently with officials at OPEC's headquarters in Vienna, in a sign of closer cooperation between importing countries and the cartel. Abraham planned to visit the city Tuesday on separate business and indicated that he might seek talks with key oil ministers. Some analysts suggested that major importers and OPEC - two often adversarial camps - might be hatching a deal aimed at heading off a war-induced disruption in supply. "This is not a time for volume control. This is a moment for OPEC to be a good global citizen," said Peter Gignoux, managing director of the petroleum desk at Salomon Smith Barney. OPEC, led by Saudi Arabia, dreads a release of crude from importers' strategic reserves because such a step would reduce the cartel's control over supplies. After meeting with Mandil on Thursday, Saudi Arabian Oil Minister Ali Naimi said that the IEA agreed producers should exhaust their spare capacity before importing countries resort to tapping into their reserves, OPEC's news service reported. Mandil and Abraham appeared to confirm this joint strategy. Washington and its IEA partners "reaffirmed their commitment to make additional volumes of oil available to the market to reinforce producers' efforts if needed," they said. IEA countries have 4 billion barrels of strategic crude reserves. The United States accounts for 600 million barrels of that total, enough to cover 39 days of imports in case of a complete halt in foreign supplies. Some analysts urged importing countries to release oil from their reserves even before a war, to forestall a supply shortage or another spike in prices. "In fact they should do it now," Drollas said, "before anything happens, because it takes time for the stuff to come through the system."

news.ft.com By Carola Hoyos in Vienna Published: March 9 2003 19:39 | Last Updated: March 9 2003 19:39

The Organisation of Petroleum Exporting Countries will meet this week for what could be its last gathering before war, but doubts persist over whether the oil cartel has the ability to bring the crude price back from its historic highs before it damages the world's fragile recovery.

Oil prices have risen by almost 60 per cent since the middle of last year to nearly $40 a barrel in recent weeks - a level not seen since the 1991 Gulf war.

For Saudi Arabia, the world's largest crude supplier, Tuesday's meeting is a chance to heal the injuries to its relationship with Washington caused by the fact that 15 of the 19 hijackers on September 11 2001 were Saudis. Ali Naimi, Saudi Arabia's oil minister, may meet Paul Abraham, his US counterpart, this week to discuss how best to tackle the oil price.

"This is Opec's time to shine and especially Saudi Arabia's," says Raad Alkadiri, analyst at PFC Energy, a Washington consulting firm. "It is the moment to remind the US just what a strategic asset [the kingdom] is in terms of the oil market."

But Saudi Arabia's ability to halt rising oil prices has proved limited. Analysts and officials in the main consuming nations question whether the kingdom and its nine Opec brethren have much spare crude to offer the famished market. In January, Opec raised members' output ceiling to 24.5m barrels a day in response to a shortage caused by the general strike in Venezuela, where exports continue to be disrupted. But the supplies Opec subsequently added to the market have done little to stop the climb in prices.

This time Opec may consider temporarily suspending its output limit altogether, but that will do little if the group is about to reach its maximum capacity.

Kuwait could add to the current shortfall in the market by halting as much as 700,000 barrels a day of its production as it shuts down fields to protect them from potential Iraqi sabotage.

Neither Kuwait nor Iraq's oil ministers will be at the meeting, it was revealed yesterday, as both countries prepare for a possible US invasion of Iraq.

A sign of Opec's exasperation with the rise in oil prices - much of which the oil ministers blame on the psychological effect of Washington's war drums - is the fact that the group this week will not bother to wait for the latest report on world oil demand and supply before making its decision, says Adam Sieminski, analyst at Deutsche Bank.

"It is an indication of the likelihood that fundamentals will not play a role in this decision that the ministers are meeting the day before the data release," he said. The most powerful of those statistics is the massive decline in commercial oil inventories - especially in the US.

Stocks have been hit by the cold winter and shortages created by the Venezuelan strike, reaching a level at which the industry's distribution network is at risk of faltering.

To counter that, the world still has strategic stockpiles of oil in leading consuming nations. Japan, the US and Europe have built up their stockpiles to 1.2bn barrels. Analysts say the release of some of that oil as soon as war starts d day will be critical.

But governments are not responsive to the market in timing the release of those stocks. After Iraq invaded Kuwait in 1990, the officials who decide the timing and volume of the release acted two months too late.

Instead of helping to settle the price, when initially went to more than $40 a barrel, the decision eventually pushed oil below $15, because in the meantime Saudi Arabia had increased its production. It is an outcome Opec does not want repeated.

The cartel will do everything in its power on Tuesday to reassure the market that it will not suffer a shortage if the US goes to war while discussing with Mr Abrahams how best to return prices to the preferred $22-$28 a barrel level.

www.thestar.com Mar. 9, 2003. 01:00 AM

U.S. Aviation Ordnance Airman Mike Nash of Vidor, Texas, takes a swing at a golf ball during a picnic on the flight deck of the aircraft carrier USS Kitty Hawk in the Persian Gulf yesterday. The ship has been at sea close to 45 days and the crew were given time off to have "a beer day." The limit is two beers per sailor.

WASHINGTON—Any day now, there will be bombs falling on Baghdad.

Conventional bombs like nothing the world has ever seen.

"The bombs will still be ringing in their ears when the 'Third Mech' shows up,'' says U.S. military analyst John Pike, of Iraq's Saddam Hussein and whatever's left of his so-called elite Republican Guard after the first days of aerial pulverization.

"The Third Mech will be driving down the main drag in Baghdad.''

Pike, director of GlobalSecurity.org, describes an assault on Saddam's regime that begins with "shock-and-awe'' aerial bombardment, and quickly moves into crush mode with the Third Infantry Division (Mechanized) rolling up from the Kuwaiti desert and U.S. Marines storming the port city of Basra.

"Chances are 90 per cent it will go pretty quickly, and 10 per cent it will turn into one big holy mess,'' predicts Pike.

But, before turning to the combat debut of bombs that weigh about 9,000 kilos and can take out an entire battalion, consider why the United States is going to war.

Consider who drew up U.S. goals and objectives in the Persian Gulf, when, and why.

Consider oil.

This particular operation — Pentagon working title: "OpPlan 10-03-Victor" — has been on the drawing board for a year, according to defence officials. The immediate goal is disarming Iraq and getting rid of Saddam. It's expected to begin soon, this week or next. Hard to hold back more than 300,000 U.S. and British troops, in place and pumped to go.

But the long-term goal, say big-picture analysts, has been in the works for far more than the 23 years since former U.S. president Jimmy Carter linked American security — "the vital interests of the United States'' — to the Persian Gulf and its oil, and threatened military intervention.

This war, say analysts, is about power and oil. It's about control of the Gulf states by means of strategic Iraq and, by extension, a final post-Cold War shakeout to give the U.S. more economic clout over China and Russia by controlling the oil spigot.

This is the moment, Thomas Barnett, from the U.S. Naval War College, wrote recently in Esquire magazine, "when Washington takes real ownership of strategic security in the age of globalization.''

The Persian Gulf has the world's biggest oil reserves. After Saudi Arabia, Iraq has the second-largest proven reserves.

"The only precedent to what is shaping up now is the Roman Empire,'' says Michael Klare, professor of peace and world security studies at Hampshire College. "There is only one power. I don't think Britain, France or Spain even came close in other centuries to the United States today.

"If the United States controls Persian Gulf oil fields, it will have a stranglehold on the world economy,'' adds Klare.

Washington is betting, Klare believes, that "controlling Gulf oil, combined with being a decade ahead of everybody else in military technology, will guarantee American supremacy for the next 50 to 100 years.''

These ideas aren't new.

For years, a small and powerful group, with corporate and political links, pushed the idea of controlling Persian Gulf oil. They did it publicly, at think-tanks and in the media. Now, this coterie of like-minded strategists controls both the Pentagon and the strategic aims of President George W. Bush's White House.

"You've got a team in the White House that is unafraid of world public opinion because they know it is unreliable, self-serving and hypocritical,'' says George Friedman, chair of the intelligence organization, Stratfor.

Originally, this was the "Kissinger plan,'' says James Akins, former U.S. ambassador to Saudi Arabia. He lost his state department job for publicly criticizing administration plans to control Arab oil back in 1975 when Henry Kissinger was secretary of state.

"I thought they were crazy then and they're crazy now,'' Akins tells the Star, adding that Congress studied plans to control Persian Gulf oil and concluded the idea was absolute madness.

"I thought this whole thing was dead. But now you've got all these `neo-cons' in power, and here we go again,'' says Akins, a Washington-based consultant. "They figure once they take over Iraq, they don't have to worry about the Saudis.''

Akins adds: "These people with their imperial ideas see themselves as part of the Great American Empire."

The players have moved steadily through the Republican presidencies of Ronald Reagan and Bush's father, George H.W. Bush and Bush himself.

They include: Vice-president Richard Cheney, a former oilman, like Bush, and defence secretary during his father's Persian Gulf War in 1991; Defence Secretary Donald Rumsfeld, once Reagan's personal emissary to the Middle East when Saddam was a U.S. friend and staunch ally; Rumsfeld's deputy Paul Wolfowitz, who began publicly calling for war against Iraq after the 9/11 terror attacks; and Richard Perle, chair of the Pentagon's Defence Policy Board, nicknamed the "Prince of Darkness'' for his political stick-handling.

They are joined by think-tankers, from fellows at the Project for the New American Century and the military and intelligence-oriented Centre for Strategic and International Studies (CSIS). Bush recently chose a CSIS forum, rather than the White House, to deliver a major prime-time speech to the American people to make the case for war. The CSIS board includes, among other heavy-hitters, Kissinger, former national security adviser Zbigniew Brzezinski and former CIA director James Schlesinger.

Bush often mentions Iraqi oil, a jarring focus for a president on the brink of war.

"We will seek to protect Iraq's natural resources from sabotage from a dying regime and ensure they are used for the benefit of Iraq's own people,'' he said in last week's radio address.

Colin Robinson, an analyst with the Washington-based Centre for Defence Information, says: "The United States can stand well-accused of trying to dominate the whole region for its oil. But conspiracy theories are usually too complicated for everybody to carry them off."

Friedman says the 1991 war left unfinished business, the "status quo'' of Saddam in power. Not so this time, he says, in a war which, as U.N. diplomats dither, has already begun.

In recent weeks, British and U.S. warplanes strayed outside "no-fly'' zones to bomb Iraqi surface-to-air missiles. Robinson describes these zones, set up by the U.S. and Britain after Desert Storm as "barely legal'' in terms of international law.

As well, U.N. officials report violations of the demilitarized zone between Iraq and Kuwait by U.S. soldiers.

But the real devastation should begin within days.

"We've got everything we need. We're just waiting on the word, the decision from the president," Maj.-Gen. Buford Blount, commander of the 3rd Infantry Division, told the Washington Post last week from Kuwait.

First comes aerial bombardment, an extraordinary 1,500 bombs every 24 hours during the time it takes heavy mechanized divisions to move up from Kuwait to Baghdad.

Big heavy bombers, from Diego Garcia in the Indian Ocean, buttressed by screaming navy and air force jets will pound Iraqi sites, picked by aerial drones and U.S. and British Special Forces already in Iraq.

Defence contractors are eager to test out new gadgetry. One new bomb is the 9,000-kilo MOAB (Massive Ordnance Air Burst).

"Well, it's very efficient,'' says Friedman. "Let's say you've got a large concentration of Republican Guard units, instead of having to do repeated bombing sorties, you can take out a battalion (500 to 600 troops) with one bomb.''

Friedman's sources in theatre tell him there are "terrific fights between defence department officials and field commanders who are raring to go now.''

He says time is the enemy of troops in the field. Sandstorms at the end of March, for example, could play havoc with laser targeting systems.

Without the anticipated "northern front'' through Turkey, there are plans for C-130s to ferry troops to northern Iraq, as well as missions for U.S. Marines and Special Forces to secure oil sites throughout Iraq.

"The U.S. military cannot be defeated on the conventional battlefield,'' says military analyst Pike.

But what about the variables?

How much of a threat is Saddam? What about chemical and biological weapons?

"We gonna find out,'' says Pike.

Meanwhile, Iraqi exiles, opposed to Saddam, have been meeting with U.S. and British oil executives, promising access and leases in return for political power.

And, the U.S., as Friedman points out, on the brink of world hegemony, is going to find out who its friends are.

"I do so enjoy Canadians (against the war) getting so obsessed with human rights, and then pay no attention to places like Venezuela,'' says Friedman, who thinks Venezuela's Hugo Chavez is next on Bush's military agenda.

"I read the Canadian press and I wonder what planet your country is on.

"We have allies, and we are going to see who they are,'' he concludes. "If France, if Canada, can't support us in opposition to Saddam Hussein, you can't say you are our allies. Canada consistently says it's an ally of the United States of America ... we'll see, won't we?''

www.kansascity.com Posted on Sun, Mar. 09, 2003 By KEN BROWN and THADDEUS HERRICK The Wall Street Journal

In a stock market starved for earnings growth, you would think investors would love an industry that is minting money now and could be flush with profits by year's end.

But shares of oil companies were down during the past six months, even as prices have soared on war fears and the strike in Venezuela.

Since its recent low in November, oil is up nearly 50 percent, yet the stocks of oil companies are up about 1 percent, slightly ahead of the overall market, which is flat for that time period. April contracts on U.S. light, sweet crude reached a post-Gulf War high Feb. 27 in New York, settling at $39.99 a barrel.

Investors, in effect, have refused to give the oil companies any credit for higher oil prices. The reason is simple: The last time there was a war in Iraq, oil prices collapsed minutes after the first bombs started to drop, from a peak of $40 a barrel in 1990 to under $20.

The conventional wisdom goes something like this: The United States attacks Iraq, oil prices collapse, the stock market soars and oil stocks lag far behind. No wonder investors have been ignoring the big earnings gains of companies such as BP PLC, ChevronTexaco Corp. and Exxon Mobil Corp.

The problem is, in the fog of war and the fog of the stock market, few scenarios play out exactly as expected.

For instance, conventional wisdom did not anticipate the stock market rally that started once the Persian Gulf War commenced in 1991. Moreover, a growing number of investors and analysts are saying that oil prices may stay higher than expected this year and oil stocks may be more attractive than people believe.

Indeed, the basic assumption of the current conventional wisdom -- that a war in the region will make oil more plentiful and therefore cheaper -- is questionable. Other wars in the Middle East, including the Iran-Iraq war and the conflicts between Israel and its neighbors, all have hurt supply and driven up oil prices, sometimes by huge amounts.

"I think the conventional wisdom is because this is what happened in the Gulf War, as soon as the first shot is fired, you run for the hills," said T. Rowe Price energy analyst Tim Parker, referring to investors selling oil and oil stocks. "But what people forget is, the war before that (Iran-Iraq), when the shooting started, (oil) did the opposite. It went to the moon."

The weak stock prices of oil companies show that even if many investors doubt the consensus view, they aren't buying.

Why? Because even if they believe oil stocks will be higher six months from now, they think the shares will get cheaper when the war starts, and they would rather wait until the stocks touch bottom before laying out money.

"We'll be clamoring down there for that good price and the good price will disappear," Parker says. "I just feel like sometimes we get a little too cute with ourselves."

Investor sentiment is also lagging behind government data.

The Energy Department's Energy Information Administration says low global inventories and dwindling spare-production capacity will keep prices above $30 this year. But an informal poll of 25 money managers based in Boston done by research firm International Strategy and Investment put the price at $27 a barrel at year's end. A mid-January poll by information company Reuters of oil analysts and consultants put the average price of oil at $22.81 this year.

What is clear is that at $30 a barrel or so, oil company earnings will be solid. "Oil companies are in fat city," said Fred Leuffer, a Bear Stearns oil industry analyst. "They're going to coin so much money in the first quarter, I don't think any of us analysts can go higher."

Leuffer, who remains generally bearish on oil and oil stocks, raised his oil price estimate from $18 a barrel to $22 and boosted his 2003 earnings estimates for ChevronTexaco 18 percent to $5.90 and ConocoPhillips by 20 percent to $5.10. He more than doubled his estimate for exploration-and-production firm Kerr-McGee Corp. to $3.75. But, he added, "The market doesn't pay for short-term windfall profits."

Oil averaged $25.03 a barrel in 2002 and $24.86 in 2001. Oil bulls give several reasons why prices can top that this year.

First, commercial inventories are considerably lower than they were in 1991. The International Energy Agency, a watchdog for oil-consuming nations, says stocks of crude oil and refined products are 2.1 percent lower than at the end of 1990, having fallen to 2.541 billion barrels from 2.611 billion barrels more than a decade ago. In the United States, the world's largest oil consumer, crude oil stocks are 12 percent below the five-year seasonal average and 16 percent below year-ago levels.

In addition, analysts don't expect Venezuela to get back to full production anytime soon following the strike there. And demand, driven in part by the cold winter and sport-utility vehicles, has stayed strong. The latest report from the Energy Information Administration showed that demand for petroleum products in the four-week period ended Feb. 21 is up 3.7 percent over the year-earlier period. Demand for distillate, which includes heating oil and diesel fuel, is up 20.9 percent.

"This is the biggest gas-guzzling economic slowdown I've ever seen," said analyst Phil Flynn of Alaron Trading Corp.

Persistently high oil prices could have broad implications for the stock market and the economy. Economists, including the director of energy economics at the Federal Reserve Bank of Dallas, say high oil prices could push the economy's sluggish growth rate toward zero this quarter.

In addition, the costs weigh on consumer spending and corporate earnings. For consumers, spending more on gasoline, electricity and heating oil means less money for wide-screen televisions, vacations and cappuccinos. "Energy prices go up, the consumer chokes and boom we go right back into recession," said Merrill Lynch equity strategist Richard Bernstein.

For the stock market it means the majority of companies earn less, some a lot less, because of energy costs. That could push stocks down.

But it also means oil companies earn more, some a lot more. Analysts say most major oil companies are priced for oil between $22 and $25 a barrel. So if oil prices stick anywhere above $28 a barrel, earnings will soar, either pushing the stocks up or leaving them very cheap.

Bear Stearns' Leuffer calculated that oil exploration and production companies such as Kerr-McGee, Amerada Hess Corp. and Occidental Petroleum Corp. would get the biggest boost to their earnings from rising oil prices. Among the major oil companies, ConocoPhillips, ChevronTexaco, and BP would see their earnings rise the most.

If oil prices fall from their lofty heights but stay relatively high, the biggest beneficiaries could be the oil refiners, companies such as Tesoro Petroleum Corp. and Valero Energy Corp. These companies' earnings would rise as margins increase because the cost of oil would fall faster than the price they get for gasoline and other refined products.

The problem is, investors know this and have driven up shares of the refiners by more than 20 percent since they bottomed in October, well ahead of both the market and the big integrated oil producers.

www.taipeitimes.com REUTERS Sunday, Mar 09, 2003,Page 10

World oil prices hurtled higher again on Friday as the US and Britain set a March 17 ultimatum for Iraq to disarm or face war.

A revised draft resolution circulated by British Foreign Secretary Jack Straw at the UN, backed by Washington, gives Baghdad 10 days to meet UN demands.

The two allies during that time hope to garner support in the bitterly divided 15-member UN Security Council for military action against Iraq, which ships around 4 percent of world oil exports.

US light crude climbed US$0.78 to US$37.78 a barrel, barely US$2 short of a recent 12-year high. Brent crude futures rose US$0.57 to US$34.10 a barrel, a two-year high.

"News of that deadline is certainly keeping the market very strong," said broker Christopher Bellew of Prudential Bache in London.

"Any final deadline will give the market another shove to the upside," said Tom James of broker Carr Futures.

Oil prices have already jumped 20 percent this year on fear that war in Iraq will hit exports from the Middle East, which pumps a third of the world's oil. Concern is growing that rising energy costs will further strain a weak economy.

An oil workers' strike in nearby Venezuela, and strong heating demand in a bitter northern winter has already drained US fuel stocks. The government warned on Thursday that gasoline prices would hit record levels this summer.

Saudi Arabia, the biggest producer in the OPEC cartel, has said it will raise production to meet any shortfall international market