sg.biz.yahoo.com Friday February 14, 3:51 AM (MORE) Dow Jones Newswires 02-13-03 1341ET By David Bird Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- U.S. crude oil imports from Venezuela dropped by 55% in December from November to just 652,000 barrels a day, the lowest level since May 1991, as an oil workers strike slashed the flow from the U.S. fourth-biggest foreign supplier, early data show.

But preliminary figures from the Energy Information Administration show imports from Saudi Arabia and Mexico rose sharply to cover for some of the lost Venezuelan supplies.

Preliminary data from oil-importing companies show crude imports from Saudi Arabia rose by 23% from November to 1.815 million b/d, the most for any month since August 2001.

Crude imports from Saudi Arabia, the world's largest oil producer and exporter, were up 33.75% from a year earlier.

The Saudis were the top supplier in December and - for the fifth straight year - were the biggest supplier for all of 2002, the data show, with U.S. crude imports for the month and the year down from a year earlier.

December crude imports were 8.619 million b/d, the company data show, down 2.5% from a year earlier. Full year 2002 figures were down 3% at 9.045 million b/d, the latest preliminary figures show. EIA has published other preliminary data showing December and 2002 slightly higher, at 8.844 million b/d and 9.066 million b/d, respectively.

Mexico, which was the second-biggest source of U.S. foreign crude supplies in both December and all of 2002, posted records for both periods.

U.S. December crude imports from Mexico jumped 13.3% from November, to 1.734 million b/d and were up 11.3% from December 2001. For the full year, crude imports from Mexico averaged a record 1.483 million b/d, up 6.4%.

Mexico supplied 19.6% of U.S. crude imports in December, up from 16% in November, and the highest monthly share since November 1985.

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02-13-03 1427ET

US Dec Venezuela Crude Imports Down 55% Versus Nov - EIA -3

Canada was the third-biggest source of foreign crude in December and for all of 2002. December crude imports averaged 1.490 million b/d, little changed from 1.485 million b/d in November and up from 1.408 million b/d a year earlier.

Full-year crude imports from Canada were up 5.8% at 1.434 million b/d.

Despite the severe cut in volume, Venezuela held its usual spot as the fourth-largest crude oil supplier in December.

Caracas held a share of just 7.4% of U.S. crude imports in December, its lowest level since July 1989 and less than half the 15% share in November.

Full-year crude imports from Venezuela averaged 1.195 million b/d, down 7.4% from the 2001 level and was the lowest since 1999.

Combined December crude oil and petroleum products imports from Venezuela plunged 51% from November, to 778,000 b/d, and were the lowest since June 1989.

Crude imports from Nigeria in December averaged 625,000 b/d, up from 556,000 b/d in November and 579,000 b/d a year earlier.

But full-year crude imports from the fifth-largest supplier plunged to 566,000 b/d from 842,000 b/d, the lowest annual level since 1987, EIA data show.

Crude oil imports from Iraq dipped to 366,000 b/d in December from 380,000 b/d in November and were down a huge 67.5% from 1.126 million b/d in December 2001 as tensions heightened over a possible U.S. war with Baghdad.

Full-year 2002 crude oil imports from Iraq dropped 44.3% to 443,000 b/d from 795,000 b/d, the lowest level since 1998.

Under an exemption to United Nations sanctions, Iraq is allowed to sell crude oil under a U.N.-monitored program which oversees the use of the oil-sale revenues. U.S. oil companies buy the Iraqi crude from foreign companies who hold contracts with Baghdad.

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02-13-03 1451ET

onebusiness.nzoom.com

The European Commission said on Thursday it was confident Opec producers can cover a disruption in oil supplies should the US attack Iraq, without the need for any release of strategic reserves held by consumer nations.

"The view of the Commission is that there is today no threat of disruption of supply and we are confident in the responsibility of producer countries," European Commission energy spokesman Gilles Gantelet told a news briefing.

The comments further cast doubt on whether the Paris-based International Energy Agency (IEA), that represents European Union and other industrialised nations on energy, will order a release from government reserves in the event of war.

Gantelet's comments followed remarks on Wednesday by US Energy Secretary Spencer Abraham who said the Bush administration would only release government stocks in the event of a "severe" disruption.

Gantelet said exporting countries had shown "in the last months" that they were willing to tackle the problem of supply shortages.

The Organisation of the Petroleum Exporting Countries (Opec) producer cartel in January agreed to raise output to compensate for lower supplies from Venezuela, where an oil workers strike is now in its 11th week.

Leading Opec member Saudi Arabia is expected to produce close to nine million barrels per day (bpd) in February up from eight million bpd in December.

Riyadh says it is willing to pump at up to full capacity of 10.5 million bpd should war cut Iraq's 1.7 million barrels daily of exports.

Brent crude at two-year high

Gantelet said the Commission was not worried now about the high price of crude. Benchmark Brent on Thursday traded at a two-year high above $US33 a barrel and US light crude broke $US36 a barrel.

"If you accept the idea that war is not inevitable we have no specific worries today on this question," Gantelet said of the oil price.

Any release of strategic oil stocks by EU countries would be triggered by the IEA, which represents 26 industrialised countries, also including the United States and Japan.

IEA Executive Director Claude Mandil said last week that he hoped Opec would be able to fill any Iraqi outage and that the agency would leave a decision until hostilities started.

Member countries would be expected to decide within hours of war starting and the oil would reach consumers within 10 days.

Gantelet said all 15 European Union member states had at least the minimum IEA requirement of 90 days' worth of oil stocks and that the average was 114 days.

The Commission -- the executive arm of the 15-nation EU -- is pushing for a greater role in coordinating energy policy but the issue has not yet been discussed at a high level by member states.

Gantelet said the high value of the euro against the dollar had offset some of the concern in Europe over the high oil price.

"We've got to consider the reality of the prices and the exchange with the euro...$US31 or $32 three years ago is not what it represents today in terms of euros."

The European Central Bank, whose primary goal is to keep inflation in check, has expressed concerns about oil prices.

The ECB has said in recent months that an increasing oil price is one of the reasons for euro zone inflation overshooting its self-imposed two percent ceiling.

Thursday February 13, 2003 - 16:23:51 EST

CALGARY (CP) - Soaring gasoline prices may help fatten profits of Canada's major oil companies, but they contribute far less than rising crude oil prices to the industry's bottom line.

In the 2002 fourth quarter, Canada's four major oil companies - Imperial Oil, Petro-Canada, Shell Canada and Suncor Energy - nearly tripled their profits to a combined $1.3 billion. But much off the profit came from soaring oil and natural gas prices and other factors, which led to dramatic increases in earnings from the so-called upstream end of the business. Profits in the downstream - refining and marketing of gasoline - for the three biggest refiners and marketers - Imperial, Petro-Canada and Shell - rose to $314 million from $208 million in the 2001 quarter.

But with gasoline prices now above 80 cents a litre across the country, federal politicians are accusing the oil industry of profiteering on the backs of drivers.

Federal Liberal MP Dan McTeague, a longtime industry critic, says "consumers are being held ransom" by high gasoline prices and he accused oil companies of raising refinery profits from about five cents a litre to 15 cents.

Those increases, McTeague warns, are going to show up when the oil companies report their first-quarter profits in April for the January-March quarter.

The profits "will be obscene and they will be unprecedented or very close to unprecedented as -a result of maintaining these refinery margins," McTeague said in an interview.

"There's no money in retail. They don't have to make money at retail when they're making 14 cents a litre at the refinery and if they happen to be in the crude business, of course they're making money at the crude level. It's a transfer price within the same company."

In the fourth quarter, Petro-Canada, owner of a national gasoline station chain, said operating profits at its marketing network rose to $15 million from $10 million in the 2001 quarter. Refinery profits, meanwhile, increased to $63 million from $38 million during the same period.

At Imperial Oil, which owns about 2,500 Esso stations, profits in refining and gasoline rose to $128 million from $75 million, with most of the increase coming from the company's refineries.

Meanwhile, Shell Canada, operator of the Shell station network, earned $108 million from its refining and marketing business, up from $85 million in the 2001 quarter.

McTeague said the government needs to consider creating a "firewall" between the retail and refining side of the business so that big companies can't produce, refine and sell gasoline under one corporate umbrella.

It's not a competitive business when the oil companies own the refineries and the gas retailers, he said.

Bill Simpkins, spokesman for the Canadian Petroleum Products Institute, said at the country's gasoline stations "there's a high level of competition for your business as a motorist."

"There's no real big return on selling gasoline," he said, instead additional money is made through the adjoining convenience store and car wash.

"The oil companies that are involved in refining and distribution and marketing, their profit on a litre of gasoline is about a penny. The dealer is working with a return of about three to five cents (per litre) on his business."

"It's a high-volume, low-margin business."

Neil Levine, spokesman for Suncor Energy Products, which operates about 300 Sunoco stations in Ontario, said more government regulation won't work because prices are affected by cost, supply-and-demand and local competition.

"What consumers are concerned about is the volatility. But what we're dealing with here is a commodity and prices go up and down. Regulation hasn't been the answer anywhere it's been tried."

Levine also said the fact Calgary-based Suncor Energy is a major oil producer, refiner and retailer doesn't matter.

"You're paying a world price (for oil). It's not a made-in-Canada price versus a Suncor price versus a Venezuela price. It's a world price for crude oil."

The gasoline price is also based on the world wholesale price for gasoline.

"The price goes up and down. Sometimes the refining end makes more money, sometimes the refining end makes less money. But in the end, take a look at the oil industry as a whole. There are good years and bad years."

"People need to realize they're paying a fair price for their gasoline even at the prices now. They're among the lowest in the world still."

www.chicagotribune.com By Melita Marie Garza Tribune staff reporter Published February 13, 2003

As the nation prepares to go to war with Iraq, the U.S. military and the domestic airline industry are vying for the same increasingly expensive commodity--jet fuel.

The competing demands for jet fuel have bid up the prices, adding to the woes of hard-hit U.S. air carriers that can ill afford to absorb higher fuel prices, their second-biggest expense behind labor.

To be sure, major military mobilizations have always required large amounts of fuel.

But jet fuel now is the core of the military's fuel strategy. In the aftermath of the Persian Gulf war in 1991, the U.S. military adopted NATO's one-fuel policy in an effort to simplify logistics and save money. These days, jet fuel powers every fighting vehicle in the air and on the land, including Army tanks and jeeps.

"The U.S. military is the largest single buyer of jet fuel in the world," said Cristina Haus, editor of Jet Fuel Intelligence. "Prices will rise even if the military has enough fuel. This is a war that can impact jet fuel more than any other crude oil product."

Before the Persian Gulf war, Kuwait was the main supplier of fuel for U.S. military aircraft. When Iraq invaded its oil-rich neighbor, Saudi Arabia stepped in to supply the U.S.-led coalition forces. This time around, however, the U.S. military has signed supply contracts with virtually every Middle East oil refiner, Haus said.

Still, supply demand tied to the U.S. military's preparation for an incursion into Iraq is but one factor contributing to the tighter market and higher prices for jet fuel.

Even though airlines have curbed flights as demand has fallen, the oil strike in Venezuela, which began Dec. 2, has intensified the problem by taking a major U.S. supplier offline for more than two months.

"Clearly, the Venezuelan situation has put upward pressure on distillate prices," Guy Caruso, administrator of the U.S. Energy Information Administration, said in an interview. "It's a combination of the Venezuelan reduction in output, coming at a time when winter demand for home heating oil, exacerbated by cold weather, is at its peak."

Shifts in production

Jet fuel, heating oil and diesel fuel all are so-called middle distillates. When demand for heating oil rises, it can shift production of jet and diesel fuel as refiners rush to capture higher prices.

Most of the demand for heating oil is generated in the Northeast, from New England through the Middle Atlantic states.

Historically, in times of tight supply, Europe provides additional shipments of heating oil to the East Coast. But colder weather in Europe has made supplies tighter there, with little left over to be shipped to the U.S., Caruso said.

Phil Flynn, vice president and senior market analyst with Alaron Trading Corp. in Chicago, said Venezuela is producing only 1.5 million barrels of oil a day.

That's still a far cry from the 3 million barrels a day it was producing, Flynn said. "The cumulative total of what we've been losing is just beginning to be felt."

Some nations stockpiling

Flynn also believes that some countries are stowing oil away in the event of war, hoping to bolster supplies.

"Anybody who can afford to put away a barrel of crude oil is doing so," Flynn said.

The higher jet fuel prices have come at a particularly critical time for the airline industry.

"The problem is that in this weak revenue environment, airlines can't pass along their increased fuel costs as they could when the economy and business traffic were booming," said Ray Neidl, an airline industry analyst. "And, even on a reduced schedule, they still have to fly airplanes."

Perhaps no airline is more vulnerable than Elk Grove Township-based United Airlines, whose precarious financial position landed it in bankruptcy court late last year and left it without recourse to financial safeguards such as fuel hedging.

Oil companies that participate in the fuel hedging process are reluctant to work with companies that may be in financial distress, the airline told employees recently. Because of United's financial situation, it was unable in 2002 to secure hedges for 2003.

In contrast, Houston-based Continental Airlines has hedged about 95 percent of its fuel at a crude oil price of $33 a barrel for the first quarter. Airlines' fuel hedging is based on the price of crude oil.

In relation to historical prices it's still very high; in relation to current market prices of about $35 a barrel, it's a little bit less, said David Messing, a Continental spokesman.

Messing warned that hedging wasn't a magic bullet. "It's a gamble," Messing said.

In general, a $1 increase in the cost of a barrel of crude oil equates to a $40 million increase in operating costs for the airline, Messing said.

It's easy to see how a relatively small swing in the price of crude oil rolls into a rather large change in the bottom line, Messing said, noting that fuel costs last year accounted for 12 percent of the airline's operating expenses.

Fuel consumption in 2002 was down 9 percent from 2001, principally because Continental is flying a reduced schedule and has moved to more fuel efficient airplanes, he said.

Still, jet fuel is a significant expense, Messing said. "If oil prices were at historically normal levels, our profitability outlook would be substantially different."

www.stuff.co.nz 14 February 2003

SINGAPORE: Oil prices were poised to scale to new 28-month highs yesterday as US fuel stocks fell to the lowest level since the 1970s Arab oil embargo, while Washington kept up efforts to build support for a war against Iraq.

US light crude touched an early peak at $US35.95 a barrel, the highest since October 2000, but eased back to $US35.82, a gain of five cents from Wednesday's settlement in New York.

"Balancing bullish fundamentals with political factors, we'll probably see a trading range between $US30 and $US40 a barrel over the next month," said Gordon Kwan, oil and gas analyst at HSBC in Hong Kong.

"Even without the threat of war in Iraq, there's still upside for crude prices. Despite talk of Venezuela increasing production and more Middle East barrels, it's not feeding into the United States yet and we're still in the depths of winter," Kwan said.

Figures from the government department Energy Information Administration (EIA) showed US crude inventories falling 4.5 million barrels to 269.8 million barrels in the week to February 7, the lowest level since October 1975.

Stocks are now below what US authorities recommend as the minimum of 270 million barrels - roughly 14 days of domestic consumption - to keep up with the nation's energy needs.

The EIA said inventories of heating oil, gasoline and jet fuel were also running at a deficit to year-ago levels.

Crude prices are less than $2 under a September 2000 peak at $37.80 when the Clinton administration ordered the release of reserves from strategic stocks. The Bush administration has so far shied away from using emergency oil.

"We are continuing to monitor the situation," US Energy Secretary Spencer Abraham said on Wednesday.

Along with healthy demand for winter heating fuels as parts of the United States have been blasted with Arctic temperatures, US fuel stocks have been severely dented by a two-month anti-government strike in Venezuela.

Venezuela, the fifth-biggest oil exporter, normally supplies 13 percent of US oil imports. Output in Latin America's biggest producer is making a slow recovery but is running at less than half of pre-strike levels at three million barrels per day.

MORE AIR STRIKE, EYES ON BLIX

Crude prices have shot up more than 30 percent since December on the Venezuelan outage and as the United States has pressed on with its campaign to disarm Iraq of banned weapons.

Iraq is the eighth-largest oil exporter, sending some two million bpd overseas.

Traders fear that with inventories already tight, war could trigger wider disruptions to crude supplies from other Middle East producers, which account for 40 percent of globally traded crude oil.

US-British aircraft attacked a ballistic missile system in southern Iraq for the second day in a row as top UN weapons inspectors prepared to report on Friday on their efforts to assess Iraq's weapons programmes.

Allied aircraft have been increasingly attacking Iraqi air defence missiles, radar and communications in the north and south, but strikes against surface tactical missiles are rare.

UN diplomats said on Wednesday that missile experts called in by arms inspectors believed that the range of Iraq's Al Samoud missile might exceed UN limits, a claim that could boost the US campaign against Baghdad.

Russia, which with France, Germany and China is opposed to imminent military action, called for more study on the missile.

The United States has called Friday's report by chief weapons inspectors Hans Blix and Mohamed ElBaradei "pivotal" in deciding whether to go to war.